Question Details

[answered] Assume that Big Company decides to acquire 100% Little Comp


Using the data in the attached Spreadsheet perform the accounting required for the acquisition of Little, Inc. by Big, Inc. This is a 100% acquisition where the book value of the assets acquired equals the acquisition price. Within the worksheet, you are to:

  1. Select an accounting method (either cost or equity) and explain why you selected this method
  2. Perform the required journal entries
  3. Complete the consolidation worksheet
  4. Prepare the consolidated balance sheet in good form

Requirements:

Complete all work on the spreadsheet attached to this assignment; it will be your only deliverable.

Clearly identify the requirements being addressed. Show all calculations within the cells of an Excel spreadsheet. This means that you must use formulas and links so that the thought process can be examined. Make good use of comments to convey your thought process as well. No hard coding of solutions. Submit a single MS Excel



Assume that Big Company decides to acquire 100% Little Company for $500

 

Big Company Balance Sheet

 

Assets, Liabilities & Equities

 

Book Value

 

Cash

 

$2,100,000

 

AR

 

$10,000

 

Inventory

 

$200,000

 

Land

 

$40,000

 

PP&E

 

$400,000

 

Accumulated Depreciation

 

-$150,000

 

Patent

 

$0

 

Total Assets

 

$2,600,000

 

AP

 

$100,000

 

Common Stock ($10 par)

 

$450,000

 

Additional Paid In Capital

 

$600,000

 

Retained Earnings

 

$1,450,000

 

Total Liabilities & Equity

 

$2,600,000

 

Little Company Balance Sheet

 

Assets, Liabilities & Equities

 

Book Value

 

Cash

 

$35,000

 

AR

 

$10,000

 

Inventory

 

$65,000

 

Land

 

$40,000

 

PP&E

 

$400,000

 

Accumulated Depreciation

 

-$150,000

 

Patent

 

$0

 

Total Assets

 

$400,000

 

AP

 

$100,000

 

Common Stock

 

$100,000

 

Additional Paid In Capital

 

$50,000

 

Retained Earnings

 

$150,000

 

Total Liabilities & Equity

 

$400,000

 

Assume that Book Value = Fair Value Prepare the journal entries for acquiring 100% of the net a

 

Little, accounting for it as a merger.

 

Account DR Which accounting method is most appropriate for represe

 

investment of this type? Prepare the journal entries for a 100% of Little Compa

 

accounting for it using the equity method

 

Account

 

DR Prepare the journal entries for a 100% Acquisition by is

 

10,000 shares of Big Company Stock

 

Account

 

DR Company for $500,000. Prepare the appropriate journal entries. uiring 100% of the net assets of

 

or it as a merger. Prepare Elimination Entries for Stock Acquisition

 

Account

 

DR

 

CR CR appropriate for representing an

 

this type? r a 100% of Little Company,

 

the equity method

 

CR 100% Acquisition by issuing

 

g Company Stock

 

CR Big Company Balance Sheet (Consolidated)

 

Assets, Liabilities & Equities

 

Book Value

 


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