Week2HomeworkExercises.xlsx

Instructions

This spreadsheet contains 16 individual worksheets that are to be completed as part of Homework #2. Please be sure to complete all 16 of them in order to earn full credit for the Excel portion of the homework.

On each of the six worksheets, enter the correct numbers in gray-shaded cells. When your answer is correct, that cell will change color to a light green. Do not copy formulas into cells – doing so will overwrite the conditional formatting that's used to make the cells change color when correct.

For guidance and instructions on how to work through these exercises, please be sure to go through the "Walk-Through Lecture" and "Practice Exercises" found in the Content section of Weeks #1 and #2. If you have questions, please post them up into the "Content & Homework Questions" forum for this week.

Exercises "1A 1B 1C", "2A 2B 2C", and "3A 3B 3C" represent three sets of a one company performing an acquisition of another. For each set, the "A" exercises are the journal entries made under an Asset Purchase, "B" exercises are the journal entries made under a Stock Purchase / Acquisition Method, and the "C" exercises represent the required entries for an Initial Consolidation if a Stock Purchase / Acquisition Method is done.

Exercises 4A, 4B, & 4C represent the journal entries that need to be made by the acquiring company and the selling company if the acquisition was made doing an Asset Purchase or a Stock Purchase using the issuance of stock on the part of the purchasing company to pay for the acquisition.

Exercises 5A, 5B, & 5C represents the journal entries that need to be made by the acquiring company to record income and dividend activities on the part of the acquired company.

Exercise 6 is a series of word-type problems similar to how questions relating to the material would be presented in multiple choice questions on our exams and the CPA exam.

1A Asset Purchase

Exercise 1A: Asset Purchase of Another Company
CheapBeer Inc. wants to purchase the net assets of FancyBrew Inc. for purposes of horizontal consolidation and will pay $750,000 cash for them. The balance sheet for FancyBrew Inc. on the date of purchase is as follows:
FancyBrew Inc.
Balance Sheet as of 7/1/20X1
Assets				Liabilities & Owners' Equity
	Book Value	Fair Market Value			Book Value	Fair Market Value
Cash	$0	$0		A/P	$75,000	$75,000
A/R	60,000	50,000		Notes Payable	25,000	25,000
Inventory	75,000	80,000		Mortgage Payable	50,000	50,000
Net Fixed Assets	150,000	200,000		Total Liabilities:	$150,000
Patents	0	25,000
				Common Stock	50,000
				Retained Earnings	85,000
				Total Equity:	$135,000
Total Assets:	$285,000			Total Liabilities & O.E.:	$285,000
A) Prepare the journal entry amounts for this asset acquisition on the books of CheapBeer Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.
Account			Debits		Credits
A/R
Inventory
Net Fixed Assets
Patents
Goodwill
Cash
A/P
Notes Payable
Mortgage Payable
	Total		$0		$0
B) Prepare the journal entry amounts for this asset acquisition on the books of FancyBrew Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.
Account			Debits		Credits
Cash
A/P
Notes Payable
Mortgage Payable
A/R
Inventory
Net Fixed Assets
Gain on Sale of Net Assets
	Total		$0		$0

1B Stock Purchase

Exercise 1B: Stock Purchase of Another Company
CheapBeer Inc. wants to purchase the net assets of FancyBrew Inc. for purposes of horizontal consolidation and will pay $750,000 cash for them. The balance sheet for FancyBrew Inc. on the date of purchase is as follows:
FancyBrew Inc.
Balance Sheet as of 7/1/20X1
Assets				Liabilities & Owners' Equity
	Book Value	Fair Market Value			Book Value	Fair Market Value
Cash	$0	$0		A/P	$75,000	$75,000
A/R	60,000	50,000		Notes Payable	25,000	25,000
Inventory	75,000	80,000		Mortgage Payable	50,000	50,000
Net Fixed Assets	150,000	200,000		Total Liabilities:	$150,000
Patents	0	25,000
				Common Stock	50,000
				Retained Earnings	85,000
				Total Equity:	$135,000
Total Assets:	$285,000			Total Liabilities & O.E.:	$285,000
A) Prepare the journal entry amounts for this stock purchase on the books of CheapBeer Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.
Account			Debits		Credits
Investment in FancyBrew Inc.
Cash
	Total		$0		$0
B) Note: There is NO journal entry made on the part of the acquired company as stock is purchased
from the shareholders, and NOT the acquired company!

1C Initial Consolidation

Exercise 1C: Initial Consolidation as of Date of Acquisition
CheapBeer Inc. purchased 100% of the outstanding stock of FancyBrew Inc. for purposes of horizontal consolidation and paid $750,000 cash for the stock. The balance sheets for the two companies immediately
after the acquisition are as follows:
FancyBrew Inc.									CheapBeer Inc.
Balance Sheet as of 7/1/20X1									Balance Sheet as of 7/1/20X1
Assets				Liabilities & Owners' Equity					Assets			Liabilities & Owners' Equity
	Book Value	Fair Market Value				Book Value	Fair Market Value			Book Value			Book Value
Cash	$0	$0		A/P		$75,000	$75,000		Cash	$250,000		A/P	$175,000
A/R	60,000	50,000		Notes Payable		25,000	25,000		A/R	175,000		Notes Payable	150,000
Inventory	75,000	80,000		Mortgage Payable		50,000	50,000		Inventory	350,000		Mortgage Payable	300,000
Net Fixed Assets	150,000	200,000		Total Liabilities:		$150,000			Net Fixed Assets	200,000		Total Liabilities:	$625,000
Patents	0	25,000							Investment in Subsidiary	750,000
				Common Stock		50,000						Common Stock	250,000
				Retained Earnings		85,000						Retained Earnings	850,000
				Total Equity:		$135,000						Total Equity:	$1,100,000
Total Assets:	$285,000			Total Liabilities & O.E.:		$285,000			Total Assets:	$1,725,000		Total Liabilities & O.E.:	$1,725,000
A) Complete the below Consolidation Entries for the "Consolidation & Elimination Worksheet" for this acquisition as of the date of the acquisition by entering the proper debit and credit amounts in the gray-shaded cells below.
		Trial Balances		Combined	Consolidation Entries				Consolidated Balance
Account		CheapBeer	FancyBrew		Entry	Debit	Entry	Credit
Cash		$250,000	$0	$250,000							Entry "A" Eliminate the subsidiary's equity against the parent's investment account
A/R		175,000	60,000	235,000			"B"
Inventory		350,000	75,000	425,000	"B"
Net Fixed Assets		200,000	150,000	350,000	"B"
Patents		0	0	0	"B"						Entry "B" Adjust the net assets of the subsidiary to Fair Market Value and offset to the investment
Investment in Subsidiary		750,000	0	750,000			"A"
							"B"
							"C"
Goodwill		0	0	0	"C"
A/P		(175,000)	(75,000)	(250,000)							Entry "C" Any remaining amount in the investment account gets eliminated to Goodwill
Notes Payable		(150,000)	(25,000)	(175,000)
Mortgage Payable		(300,000)	(50,000)	(350,000)
Common Stock – CheapBeer		(250,000)		(250,000)
Common Stock – FancyBrew			(50,000)	(50,000)	"A"
Retained Earnings – CheapBeer		(850,000)		(850,000)
Retained Earnings – FancyBrew			(85,000)	(85,000)	"A"
	Totals	$0	$0	$0		$0		$0	$0

2A Asset Purchase

Exercise 2A: Asset Purchase of Another Company
HotSauce Inc. wants to purchase the net assets of AuntyAcid Inc. for purposes of horizontal consolidation and will pay $850,000 cash for them. The balance sheet for AuntyAcid Inc. on the date of purchase is as follows:
AuntyAcid Inc.
Balance Sheet as of 3/31/20X1
Assets				Liabilities & Owners' Equity
	Book Value	Fair Market Value			Book Value	Fair Market Value
Cash	$0	$0		A/P	$75,000	$75,000
A/R	100,000	95,000		Notes Payable	125,000	125,000
Inventory	250,000	275,000		Mortgage Payable	150,000	120,000
Net Fixed Assets	250,000	350,000		Total Liabilities:	$350,000
Patents	0	100,000
				Common Stock	200,000
				Retained Earnings	50,000
				Total Equity:	$250,000
Total Assets:	$600,000			Total Liabilities & O.E.:	$600,000
A) Prepare the journal entry amounts for this asset acquisition on the books of HotSauce Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.
Account			Debits		Credits
A/R
Inventory
Net Fixed Assets
Patents
Goodwill
Cash
A/P
Notes Payable
Mortgage Payable
	Total		$0		$0
B) Prepare the journal entry amounts for this asset acquisition on the books of AuntyAcid Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.
Account			Debits		Credits
Cash
A/P
Notes Payable
Mortgage Payable
A/R
Inventory
Net Fixed Assets
Gain on Sale of Net Assets
	Total		$0		$0

2B Stock Purchase

Exercise 2B: Stock Purchase of Another Company
HotSauce Inc. wants to purchase the net assets of AuntyAcid Inc. for purposes of horizontal consolidation and will pay $850,000 cash for them. The balance sheet for AuntyAcid Inc. on the date of purchase is as follows:
AuntyAcid Inc.
Balance Sheet as of 3/31/20X1
Assets				Liabilities & Owners' Equity
	Book Value	Fair Market Value			Book Value	Fair Market Value
Cash	$0	$0		A/P	$75,000	$75,000
A/R	100,000	95,000		Notes Payable	125,000	125,000
Inventory	250,000	275,000		Mortgage Payable	150,000	120,000
Net Fixed Assets	250,000	350,000		Total Liabilities:	$350,000
Patents	0	100,000
				Common Stock	200,000
				Retained Earnings	50,000
				Total Equity:	$250,000
Total Assets:	$600,000			Total Liabilities & O.E.:	$600,000
A) Prepare the journal entry amounts for this stock purchase on the books of HotSauce Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.
Account			Debits		Credits
Investment in AuntyAcid Inc.
Cash
	Total		$0		$0
B) Note: There is NO journal entry made on the part of the acquired company as stock is purchased
from the shareholders, and NOT the acquired company!

2C Initial Consolidation

Exercise 2C: Initial Consolidation as of Date of Acquisition
HotSauce Inc. purchased AuntyAcid Inc. for purposes of horizontal consolidation and paid $850,000 cash for 100% of their outstanding stock. The balance sheets for the two companies immediately after the acquisition are as follows:
AuntyAcid Inc.									HotSauce Inc.
Balance Sheet as of 3/31/20X1									Balance Sheet as of 3/31/20X1
Assets				Liabilities & Owners' Equity					Assets			Liabilities & Owners' Equity
	Book Value	Fair Market Value				Book Value	Fair Market Value			Book Value			Book Value
Cash	$0	$0		A/P		$75,000	$75,000		Cash	$500,000		A/P	$100,000
A/R	100,000	95,000		Notes Payable		125,000	125,000		A/R	150,000		Notes Payable	50,000
Inventory	250,000	275,000		Mortgage Payable		150,000	120,000		Inventory	400,000		Mortgage Payable	500,000
Net Fixed Assets	250,000	350,000		Total Liabilities:		$350,000			Net Fixed Assets	300,000		Total Liabilities:	$650,000
Patents	0	100,000							Investment in Subsidiary	850,000
				Common Stock		200,000						Common Stock	750,000
				Retained Earnings		50,000						Retained Earnings	800,000
				Total Equity:		$250,000						Total Equity:	$1,550,000
Total Assets:	$600,000			Total Liabilities & O.E.:		$600,000			Total Assets:	$2,200,000		Total Liabilities & O.E.:	$2,200,000
A) Complete the below Consolidation Entries for the "Consolidation & Elimination Worksheet" for this acquisition as of the date of the acquisition by entering the proper debit and credit amounts in the gray-shaded cells below.
		Trial Balances		Combined	Consolidation Entries				Consolidated Balance
Account		HotSauce	AuntyAcid		Entry	Debit	Entry	Credit			Entry "A" Eliminate the subsidiary's equity against the parent's investment account
Cash		$500,000	$0	$500,000
A/R		150,000	100,000	250,000			"B"
Inventory		400,000	250,000	650,000	"B"
Net Fixed Assets		300,000	250,000	550,000	"B"						Entry "B" Adjust the net assets of the subsidiary to Fair Market Value and offset to the investment
Patents		0	0	0	"B"
Investment in Subsidiary		850,000	0	850,000			"A"
							"B"
							"C"
Goodwill		0	0	0	"C"						Entry "C" Any remaining amount in the investment account gets eliminated to Goodwill
A/P		(100,000)	(75,000)	(175,000)
Notes Payable		(50,000)	(125,000)	(175,000)
Mortgage Payable		(500,000)	(150,000)	(650,000)	"B"
Common Stock – HotSauce		(750,000)		(750,000)
Common Stock – AuntyAcid			(200,000)	(200,000)	"A"
Retained Earnings – HotSauce		(800,000)		(800,000)
Retained Earnings – AuntyAcid			(50,000)	(50,000)	"A"
	Totals	$0	$0	$0		$0		$0	$0

3A Asset Purchase

Exercise 3A: Asset Purchase of Another Company
MarshaMarshaMarsha Inc. wants to purchase the net assets of OhMyNose Inc. for purposes of horizontal consolidation and will pay $2,000,000 cash for them. The balance sheet for OhMyNose Inc. on the date of purchase is as follows:
OhMyNose Inc.
Balance Sheet as of 9/15/20X1
Assets				Liabilities & Owners' Equity
	Book Value	Fair Market Value			Book Value	Fair Market Value
Cash	$0	$0		A/P	$250,000	$250,000
A/R	250,000	250,000		Notes Payable	50,000	50,000
Inventory	150,000	150,000		Bonds Payable	500,000	450,000
Net Fixed Assets	500,000	1,000,000		Total Liabilities:	$800,000
Trademarks	100,000	500,000
				Common Stock	25,000
				Retained Earnings	175,000
				Total Equity:	$200,000
Total Assets:	$1,000,000			Total Liabilities & O.E.:	$1,000,000
A) Prepare the journal entry amounts for this asset acquisition on the books of MarshaMarshaMarsha Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.
Account			Debits		Credits
A/R
Inventory
Net Fixed Assets
Trademarks
Goodwill
Cash
A/P
Notes Payable
Bonds Payable
	Total		$0		$0
B) Prepare the journal entry amounts for this asset acquisition on the books of OhMyNose Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.
Account			Debits		Credits
Cash
A/P
Notes Payable
Bonds Payable
A/R
Inventory
Net Fixed Assets
Trademarks
Gain on Sale of Net Assets
	Total		$0		$0

3B Stock Purchase

Exercise 3B: Stock Purchase of Another Company
MarshaMarshaMarsha Inc. wants to purchase the net assets of OhMyNose Inc. for purposes of horizontal consolidation and will pay $2,000,000 cash for them. The balance sheet for OhMyNose Inc. on the date of purchase is as follows:
OhMyNose Inc.
Balance Sheet as of 9/15/20X1
Assets				Liabilities & Owners' Equity
	Book Value	Fair Market Value			Book Value	Fair Market Value
Cash	$0	$0		A/P	$250,000	$250,000
A/R	250,000	250,000		Notes Payable	50,000	50,000
Inventory	150,000	150,000		Bonds Payable	500,000	450,000
Net Fixed Assets	500,000	1,000,000		Total Liabilities:	$800,000
Trademarks	100,000	500,000
				Common Stock	25,000
				Retained Earnings	175,000
				Total Equity:	$200,000
Total Assets:	$1,000,000			Total Liabilities & O.E.:	$1,000,000
A) Prepare the journal entry amounts for this asset acquisition on the books of MarshaMarshaMarsha Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.
Account			Debits		Credits
Investment in OhMyNose Inc.
Cash
	Total		$0		$0
B) Note: There is NO journal entry made on the part of the acquired company as stock is purchased
from the shareholders, and NOT the acquired company!

3C Initial Consolidation

Exercise 3C: Initial Consolidation as of Date of Acquisition
MarshaMarshaMarsha Inc. purchased 100% of the outstanding stock of OhMyNose Inc. for purposes of horizontal consolidation and paid $2,000,000 cash for the stock. The balance sheets for the two companies immediately
after the acquisition are as follows:
OhMyNose Inc.									MarshaMarshaMarsha Inc.
Balance Sheet as of 9/15/20X1									Balance Sheet as of 9/15/20X1
Assets				Liabilities & Owners' Equity					Assets			Liabilities & Owners' Equity
	Book Value	Fair Market Value				Book Value	Fair Market Value			Book Value			Book Value
Cash	$0	$0		A/P		$250,000	$250,000		Cash	$750,000		A/P	$1,000,000
A/R	250,000	250,000		Notes Payable		50,000	50,000		A/R	500,000		Notes Payable	250,000
Inventory	150,000	150,000		Bonds Payable		500,000	450,000		Inventory	600,000		Mortgage Payable	1,500,000
Net Fixed Assets	500,000	1,000,000		Total Liabilities:		$800,000			Net Fixed Assets	2,500,000		Total Liabilities:	$2,750,000
Trademarks	100,000	500,000							Investment in Subsidiary	2,000,000
				Common Stock		25,000						Common Stock	500,000
				Retained Earnings		175,000						Retained Earnings	3,100,000
				Total Equity:		$200,000						Total Equity:	$3,600,000
Total Assets:	$1,000,000			Total Liabilities & O.E.:		$1,000,000			Total Assets:	$6,350,000		Total Liabilities & O.E.:	$6,350,000
A) Complete the below Consolidation Entries for the "Consolidation & Elimination Worksheet" for this acquisition as of the date of the acquisition by entering the proper debit and credit amounts in the gray-shaded cells below.
		Trial Balances		Combined	Consolidation Entries				Consolidated Balance
Account		Marsha(3)	OhMyNose		Entry	Debit	Entry	Credit
Cash		$750,000	$0	$750,000							Entry "A" Eliminate the subsidiary's equity against the parent's investment account
A/R		500,000	250,000	750,000
Inventory		600,000	150,000	750,000
Net Fixed Assets		2,500,000	500,000	3,000,000	"B"
Trademarks		0	100,000	100,000	"B"						Entry "B" Adjust the net assets of the subsidiary to Fair Market Value and offset to the investment
Investment in Subsidiary		2,000,000	0	2,000,000			"A"
							"B"
							"C"
Goodwill		0	0	0	"C"
A/P		(1,000,000)	(250,000)	(1,250,000)							Entry "C" Any remaining amount in the investment account gets eliminated to Goodwill
Notes Payable		(250,000)	(50,000)	(300,000)
Bonds Payable		0	(500,000)	(500,000)	"B"
Mortgage Payable		(1,500,000)	0	(1,500,000)
Common Stock – Marsha(3)		(500,000)		(500,000)
Common Stock – OhMyNose			(25,000)	(25,000)	"A"
Retained Earnings – Marsha(3)		(3,100,000)		(3,100,000)
Retained Earnings – OhMyNose			(175,000)	(175,000)	"A"
	Totals	$0	$0	$0		$0		$0	$0

4A Issuing Stock

Exercise 4A: Asset Purchase v Stock Purchase with Issuing Stock for Payment
Ginger Inc. is thinking about undertaking vertical integration by taking over the functions performed by one of their suppliers, Skipper Inc. Ginger can either buy the net assets of, or 100% of the outstanding stock of Skipper for $800,000 plus $50,000 in direct acquisition costs. Below is financial information for Skipper as of 12/31/20X1:
Skipper, Inc.
Balance Sheet as of 12/31/20X1
Assets		Book	FMV		Liabilities	Book	FMV
Cash		$ –	$ –		A/P	$ 50,000	$ 50,000
A/R		500,000	475,000		Notes Payable	150,000	150,000
Inventory		250,000	250,000		Bonds Payable	200,000	200,000
Trademark		–	50,000
Net Fixed Assets		250,000	300,000		Equity	600,000
Total Assets		$ 1,000,000			Total Liabilities & O.E.	$ 1,000,000
A) Complete the journal entry made by Ginger to account for an asset purchase of Skipper on 12/31/20X1 by entering the proper amounts in the gray-shaded cells. Ginger paid for the purchase price by issuing 20,000 shares of its stock which had a market value of $40 per share and a Par Value of $5 per share. When the correct amount is entered, the cell will change color:
Account				Debit		Credit
Accounts Receivable
Inventory
Trademark
Net Fixed Assets
Goodwill
Acquisition Expenses
	A/P
	Notes Payable
	Bonds Payable
	Common Stock at Par
	APIC, Common Stock
	Cash
				0		0
B) Complete the journal entry made by Skipper to account for the asset purchase by Ginger on 12/31/20X1 by entering the proper amounts in the gray-shaded cells. When the correct amount is entered, the cell will change color:
Account				Debit		Credit
Marketable Securities in Ginger, Inc.
A/P
Notes Payable
Bonds Payable
	A/R
	Inventory
	Net Fixed Assets
	Gain on Sale
				0		0
C) Complete the journal entry made by Ginger to account for a stock purchase of Skipper on 12/31/20X1 by entering the proper amounts in the gray-shaded cells. Ginger paid for the purchase price by issuing 20,000 shares of its stock which had a market value of $40 per share and a Par Value of $5 per share. When the correct amount is entered, the cell will change color:
Account				Debit		Credit
Investment in Skipper
Acquisition Expenses
	Common Stock at Par
	APIC, Common Stock
	Cash
				0		0

4B Issuing Stock

Exercise 4B: Asset Purchase v Stock Purchase with Issuing Stock for Payment
Howell Inc. is thinking about undertaking vertical integration by taking over the functions performed by one of their suppliers, Thurston Inc. Howell can either buy the net assets of, or 100% of the outstanding stock of Thurston for $1,000,000 plus $25,000 in direct acquisition costs. Below is financial information for Thurston as of 5/15/20X1:
Thurston, Inc.
Balance Sheet as of 5/15/20X1
Assets		Book	FMV		Liabilities	Book	FMV
Cash		$ –	$ –		A/P	$ 500,000	$ 500,000
A/R		1,500,000	1,400,000		Notes Payable	500,000	500,000
Inventory		750,000	750,000		Bonds Payable	1,500,000	1,500,000
Patent		–	50,000
Net Fixed Assets		1,000,000	500,000		Equity	750,000
Total Assets		$ 3,250,000			Total Liabilities & O.E.	$ 3,250,000
A) Complete the journal entry made by Howell to account for an asset purchase of Thurston on 5/15/20X1 by entering the proper amounts in the gray-shaded cells. Howell paid for the purchase price by issuing 100,000 shares of its stock which had a market value of $10 per share and a Par Value of $1 per share. When the correct amount is entered, the cell will change color:
Account				Debit		Credit
Accounts Receivable
Inventory
Patent
Net Fixed Assets
Goodwill
Acquisition Expenses
	A/P
	Notes Payable
	Bonds Payable
	Common Stock at Par
	APIC, Common Stock
	Cash
				0		0
B) Complete the journal entry made by Thurston to account for the asset purchase by Howell on 5/15/20X1 by entering the proper amounts in the gray-shaded cells. When the correct amount is entered, the cell will change color:
Account				Debit		Credit
Marketable Securities in Howell, Inc.
A/P
Notes Payable
Bonds Payable
	A/R
	Inventory
	Net Fixed Assets
	Gain on Sale
				0		0
C) Complete the journal entry made by Howell to account for a stock purchase of Thurston on 5/15/20X1 by entering the proper amounts in the gray-shaded cells. Howell paid for the purchase price by issuing 100,000 shares of its stock which had a market value of $10 per share and a Par Value of $1 per share. When the correct amount is entered, the cell will change color:
Account				Debit		Credit
Investment in Thurston
Acquisition Expenses
	Common Stock at Par
	APIC, Common Stock
	Cash
				0		0

4C Issuing Stock

Exercise 4C: Asset Purchase v Stock Purchase with Issuing Stock for Payment
Genie Inc. is thinking about undertaking vertical integration by taking over the functions performed by one of their suppliers, Rogers Inc. Genie can either buy the net assets of, or 100% of the outstanding stock of Rogers for $500,000 plus $10,000 in direct acquisition costs. Below is financial information for Rogers as of 7/1/20X1:
Rogers, Inc.
Balance Sheet as of 7/1/20X1
Assets		Book	FMV		Liabilities	Book	FMV
Cash		$ –	$ –		A/P	$ 25,000	$ 25,000
A/R		100,000	75,000		Accrued Expenses	75,000	75,000
Inventory		50,000	50,000
Trademark		–	25,000
Net Fixed Assets		550,000	300,000		Equity	600,000
Total Assets		$ 700,000			Total Liabilities & O.E.	$ 700,000
A) Complete the journal entry made by Genie to account for an asset purchase of Rogers on 7/1/20X1 by entering the proper amounts in the gray-shaded cells. Genie paid for the purchase price by issuing 10,000 shares of its stock which had a market value of $50 per share and a Par Value of $5 per share. When the correct amount is entered, the cell will change color:
Account				Debit		Credit
Accounts Receivable
Inventory
Trademark
Net Fixed Assets
Goodwill
Acquisition Expenses
	A/P
	Accrued Expenses
	Common Stock at Par
	APIC, Common Stock
	Cash
				0		0
B) Complete the journal entry made by Rogers to account for the asset purchase by Genie on 7/1/20X1 by entering the proper amounts in the gray-shaded cells. When the correct amount is entered, the cell will change color:
Account				Debit		Credit
Marketable Securities in Genie, Inc.
A/P
Accrued Expenses
Loss on Sale of Net Assets
	A/R
	Inventory
	Net Fixed Assets
				0		0
C) Complete the journal entry made by Genie to account for a stock purchase of Rogers on 7/1/20X1 by entering the proper amounts in the gray-shaded cells. Genie paid for the purchase price by issuing 10,000 shares of its stock which had a market value of $50 per share and a Par Value of $5 per share. When the correct amount is entered, the cell will change color:
Account				Debit		Credit
Investment in Rogers
Acquisition Expenses
	Common Stock at Par
	APIC, Common Stock
	Cash
				0		0

5A Income of Subsidiary

Exercise 5A: Accounting for the Income of a Subsidiary
Meat Wad Inc., who is 100% owned by Frylock Inc., reports the following income and dividend results for 202X:
	Net Income; 1st Quarter (3/31)		$75,000		Net Income; 3rd Quarter (9/30)		$50,000
	Dividend Declared (5/16)		$20,000		Dividend Declared (12/20)		$25,000
	Net Income; 2nd Quarter (6/30)		$40,000		Net Income; 4th Quarter (12/31)		$75,000
A) Record the 202X journal entries made by Frylock to account for the income / dividends of Meat Wad using the Cost Method of accounting for the income of a subsidiary by entering the proper amounts in the gray-shaded cells. When the correct amount is entered, the cell will change color:
Date	Account			Debit		Credit
5/16/202X	Dividends Receivable
		Investment Income
12/20/202X	Dividends Receivable
		Investment Income
B) Record the 202X journal entries made by Frylock to account for the income / dividends of Meat Wad using the Simple Equity Method of accounting for the income of a subsidiary by entering the proper amounts in the gray-shaded cells. When the correct amount is entered, the cell will change color:
Date	Account			Debit		Credit
3/31/202X	Investment in Meat Wad
		Investment Income
5/16/202X	Dividends Receivable
		Investment in Meat Wad
6/30/202X	Investment in Meat Wad
		Investment Income
9/30/202X	Investment in Meat Wad
		Investment Income
12/20/202X	Dividends Receivable
		Investment in Meat Wad
12/31/202X	Investment in Meat Wad
		Investment Income

5B Income of Subsidiary

Exercise 5B: Accounting for the Income of a Subsidiary
Meat Wad Inc., who is 100% owned by Frylock Inc., reports the following income and dividend results for 202X:
	Net Income; 1st Quarter (3/31)		$150,000		Net Income; 3rd Quarter (9/30)		$30,000
	Dividend Declared (5/16)		$15,000		Dividend Declared (12/20)		$5,000
	Net Loss; 2nd Quarter (6/30)		($25,000)		Net Income; 4th Quarter (12/31)		$75,000
A) Record the 202X journal entries made by Frylock to account for the income / dividends of Meat Wad using the Cost Method of accounting for the income of a subsidiary by entering the proper amounts in the gray-shaded cells. When the correct amount is entered, the cell will change color:
Date	Account			Debit		Credit
5/16/202X	Dividends Receivable
		Investment Income
12/20/202X	Dividends Receivable
		Investment Income
B) Record the 202X journal entries made by Frylock to account for the income / dividends of Meat Wad using the Simple Equity Method of accounting for the income of a subsidiary by entering the proper amounts in the gray-shaded cells. When the correct amount is entered, the cell will change color:
Date	Account			Debit		Credit
3/31/202X	Investment in Meat Wad
		Investment Income
5/16/202X	Dividends Receivable
		Investment in Meat Wad
6/30/202X	Investment Loss
		Investment in Meat Wad
9/30/202X	Investment in Meat Wad
		Investment Income
12/20/202X	Dividends Receivable
		Investment in Meat Wad
12/31/202X	Investment in Meat Wad
		Investment Income

5C Income of Subsidiary

Exercise 5C: Accounting for the Income of a Subsidiary

Meat Wad Inc., who is 100% owned by Frylock Inc., reports the following income and dividend results for 202X:

Dividend Declared (1/20)

$30,000

Dividend Declared (7/20)

$10,000

Net Income; 1st Quarter (3/31)

$60,000

Net Loss; 3rd Quarter (9/30)

($15,000)

Dividend Declared (4/20)

$25,000

Dividend Declared (10/20)

$5,000

Net Loss; 2nd Quarter (6/30)

($30,000)

Net Income; 4th Quarter (12/31)

$125,000

A) Record the 202X journal entries made by Frylock to account for the income / dividends of Meat Wad using the Cost Method of accounting for the income of a subsidiary by selecting the proper account to be debited or credited using the drop down menu, and then entering the proper amounts in the gray-shaded cells. When the correct account is selected and the correct amount is entered, the cell will change color:

Date

Account

Debit

Credit

1/20/202X

Dividends Receivable

Investment in Meat Wad

4/20/202X

Investment Income

Investment Loss

7/20/202X

10/20/202X

B) Record the 2020 journal entries made by Frylock to account for the income / dividends of Meat Wad using the Simple Equity Method of accounting for the income of a subsidiary by selecting the proper account to be debited or credited using the drop down menu, and then entering the proper amounts in the gray-shaded cells. When the correct account is selected and the correct amount is entered, the cell will change color:

Date

Account

Debit

Credit

1/20/202X

3/31/202X

4/20/202X

6/30/202X

7/20/202X

9/30/202X

10/20/202X

12/31/202X

6 Word Problems

Below are several "word type" problems that are written in the manner / style one will expect to see on both our exams and the CPA exam when it comes to certain aspects of the material we're covering. These types of questions require you to understand what is being asked for, identify the relevant information in the question, and determine the correct answer. In a multiple-choice question, which is what you will see on our exams and a portion of the CPA exam, you will have a number of choices to choose from, including of course the correct answer. For our purposes, you're being asked to figure out the correct answer and enter accordingly per instructions below. Note: These are not intended to be an exam review.

For each of the below, follow the instructions and when answers are correct, the gray-shaded cells will turn green.

1) Company A owns all of the stock of Company B, and uses the Simple Equity Method to account for the net income of Company B. On 3/31/2X, Company B reported Net Income of $100,000. The entry made to account for this by Company A will be:

Select Proper Debit Account Using Drop-Down Menu

Enter Debit Amount

Select Proper Credit Account Using Drop-Down Menu

Enter Credit Amount

Cash

Dividends Receivable

2) Company A owns all of the stock of Company B, and uses the Simple Equity Method to account for the net income of Company B. On 7/31/2X, Company B declared a dividend of $50,000. The entry made to account for this by Company A will be:

Goodwill

Investment

Select Proper Debit Account Using Drop-Down Menu

Enter Debit Amount

Select Proper Credit Account Using Drop-Down Menu

Enter Credit Amount

Investment Income

3) On that date that it was acquired 100% by Company A, Company B has total assets with a BV of $500,000 and a FMV of $600,000, and total liabilities with a BV of $100,000 and a FMV of $50,000. If Company A paid $650,000 for 100% of Company B's outstanding stock, how much Goodwill will Company A recognize when booking this transaction?

Enter the amount of Goodwill to be booked Here –>

4) In a direct purchase, Company B sold all its assets and liabilities to Company A for $500,000. At the time of the sale, the BV of Company B's assets was $200,000 and the FMV was $800,000, and BV and FMV of liabilities was $50,000. the amount of gain or loss recognized by Company B from this transaction would be:

Select Gain or Loss

Enter Amount

Gain

Loss

Week2HomeworkExercises.xlsx

Week2HomeworkExercises.xlsx

Instructions

1A Asset Purchase

1B Stock Purchase

1C Initial Consolidation

2A Asset Purchase

2B Stock Purchase

2C Initial Consolidation

3A Asset Purchase

3B Stock Purchase

3C Initial Consolidation

4A Issuing Stock

4B Issuing Stock

4C Issuing Stock

5A Income of Subsidiary

5B Income of Subsidiary

5C Income of Subsidiary

6 Word Problems

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