Admas University

Olympia Campus
Department of Accounting & Finance
Individual Assignment II on the course advanced Accounting
By Instructor Dirar Abreha Phone Number: - 0914189646
Last submission June 20/2020
Workout Question

Your work should be clear and neat

The balance sheets of both companies immediately after the acquisition of shares are as
follows and the cash balance before acquisition date was $200,000.

Balance Sheet P Company S Company

Cash $ 40,000 $ 40,000
Other current assets 280,000 100,000
Plant and equipment 240,000 80,000
Land 80,000 40,000
Investment in Sill 160,000
Total assets $ 800,000 $ 260,000

Liabilities $ 120,000 $ 100,000

Common stock 400,000 100,000
Other Contributed capital 80,000 20,000
Retained earnings 200,000 40,000
Total Liab. and Equity $ 800,000 $ 260,000

Case I (a): Assume that on January 1, 2013, P Company acquired all the outstanding
stock (10,000 shares) of S Company for cash of $160,000. What journal entry would P
Company make to record the shares of S Company acquired?

Case I (b): Assume that on January 1, 2013, P Company acquired 90% (9,000 shares) of the
stock of S Company for $144,000. What journal entry would P Company make to record the
shares of S Company acquired?

Case II (a): Assume that on January 1, 2013, P Company acquired 80% (8,000 shares) of the
stock of S Company for $148,000. We assume the difference is attributable to land and with
a current market value higher than historical cost by $5,000 and $7,000 respectively.