Reference no: EM132861319
Question - On January 1, 2016, Prima Company issued 1,500 of its $20 par value common shares with a fair value of $50 per share in exchange for 2,000 outstanding common shares of Swatch Company in a purchase transaction. Registration costs amounted to $1,700 paid in cash. Just prior to the acquisition, the balance sheets of the two companies were as follows:
Prima Swatch
Cash $73,000 $13,000
Accounts Receivable (net) 95,000 19,000
Inventory 58,000 25,000
Plant and Equipment (net) 95,000 43,000
Land 26,000 20,000
Total Assets $347,000 $120,000
Accounts Payable $66,000 16,000
Notes Payable 82,000 21,000
Common Stock, $20 par value 100,000 40,000
Other Contributed Capital 60,000 24,000
Retained Earnings 39,000 19,000
Total Liabilities and Equities $347,000 $120,000
Any differences between the book value of equity and the value implied by the purchase price relates to Land.
Required -
1. Prepare the journal entry on Prima's books to record the exchange of stock.
2. Prepare Computation and Allocation Schedule for the Difference between book value and value implied by the purchase price.
3. Calculate the consolidated balance for each of the following accounts as of December 31, 2016:
1. Cash
2. Land
3. Common Stock
4. Other Contributed Capital