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Little, Inc. by Big, Inc.

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Question;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:Select an accounting method (either cost or equity) and explain why you selected this methodPerform the required journal entriesComplete the consolidation worksheetPrepare the consolidated balance sheet in good formRequirements: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 file for grading.Assume that Big Company decides to acquire 100% Little Company for $500,000. Prepare the appropriate journal entries.Big Company Balance Sheet Prepare the journal entries for a 100% Asset Acquisition (using Cash) Prepare Elimination Entries for Stock AcquisitionAssets, Liabilities & Equities Book Value Account DR CRCash $2,100,000 Account DR CRAR $10,000Inventory $200,000Land $40,000PP&E $400,000Accumulated Depreciation -$150,000Patent $0Total Assets $2,600,000AP $100,000Common Stock ($10 par) $450,000Additional Paid In Capital $600,000 Which accounting method is most appropriate for representing an investment of this type? Big Company Balance Sheet (Consolidated)Retained Earnings $1,450,000 Assets, Liabilities & Equities Book ValueTotal Liabilities & Equity $2,600,000Little Company Balance SheetAssets, Liabilities & Equities Book ValueCash $35,000AR $10,000Inventory $65,000Land $40,000PP&E $400,000 Prepare the journal entries for a 100% Asset Acquisition (using Big Company Cash)Accumulated Depreciation -$150,000Patent $0 Account DR CRTotal Assets $400,000AP $100,000Common Stock $100,000 Prepare the journal entries for a 100% Acquisition by issuing 10,000 shares of Big Company StockAdditional Paid In Capital $50,000Retained Earnings $150,000 Account DR CRTotal Liabilities & Equity $400,000Assume that Book Value = Fair ValueI can send the excel file2) Assume that Big Company decides to acquire 80% Little Company for $500,000. Prepare the appropriate journal entries.Big Company Balance Sheet Which accounting method is most appropriate for representing an investment of this type? Prepare Elimination Entries for Stock AcquisitionAssets, Liabilities & Equities Book Value Account DR CRCash $2,100,000AR $10,000Inventory $200,000Land $40,000PP&E $400,000Accumulated Depreciation -$150,000Patent $0Total Assets $2,600,000 Prepare the journal entries for a 80% Asset Acquisition (using Big Company Cash)AP $100,000Common Stock ($10 par) $450,000 Account DR CRAdditional Paid In Capital $600,000Retained Earnings $1,450,000Total Liabilities & Equity $2,600,000 Prepare the journal entries for a 80% Acquisition by issuing 10,000 shares of Big Company Stock Big Company Balance Sheet (Consolidated)Little Company Balance Sheet Assets, Liabilities & EquitiesAssets, Liabilities & Equities Book Value Account DR CR CashCash $35,000 Investment in Little ARAR $10,000 Common Stock InventoryInventory $65,000 Additional Paid In Capital LandLand $40,000 Allocation of Excess Schedule PP&E (net)PP&E $400,000 Accumulated DepreciationAccumulated Depreciation -$150,000 GoodwillPatent $0 PatentTotal Assets $400,000 Total AssetsAP $100,000 APCommon Stock $100,000 Common Stock ($10 par)Additional Paid In Capital $50,000 Additional Paid In CapitalRetained Earnings $150,000 Retained EarningsTotal Liabilities & Equity $400,000 NCITotal Liabilities & EquityAssume that all noncash assets have a Fair Value that is 10% greater than Book Value

 

Paper#38178 | Written in 18-Jul-2015

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