Assume that Big Company decides to acquire 100% Little Company for $500,000

Assignment Option #1: Acquisitions with Ownership = 100% and BV = FMV

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 method
Perform the required journal entries
Complete the consolidation worksheet
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 file for grading.

Review the grading rubric, which can be accessed from the Course Information page, to understand how you will be graded on this assignment. Reach out to your instructor if you have questions about the assignment.

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 Acquisition
Assets, Liabilities & Equities Book Value Account DR CR
Cash $2,100,000 Account DR CR
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 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 Value
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 Prepare the journal entries for a 100% Asset Acquisition (using Big Company Cash)
Accumulated Depreciation -$150,000
Patent $0 Account DR CR
Total Assets $400,000
AP $100,000
Common Stock $100,000 Prepare the journal entries for a 100% Acquisition by issuing 10,000 shares of Big Company Stock
Additional Paid In Capital $50,000
Retained Earnings $150,000 Account DR CR
Total Liabilities & Equity $400,000
Assume that Book Value = Fair Value
I can send the excel file

2) 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 Acquisition
Assets, Liabilities & Equities Book Value Account DR CR
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 Prepare the journal entries for a 80% Asset Acquisition (using Big Company Cash)
AP $100,000
Common Stock ($10 par) $450,000 Account DR CR
Additional Paid In Capital $600,000
Retained Earnings $1,450,000
Total 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 & Equities
Assets, Liabilities & Equities Book Value Account DR CR Cash
Cash $35,000 Investment in Little AR
AR $10,000 Common Stock Inventory
Inventory $65,000 Additional Paid In Capital Land
Land $40,000 Allocation of Excess Schedule PP&E (net)
PP&E $400,000 Accumulated Depreciation
Accumulated Depreciation -$150,000 Goodwill
Patent $0 Patent
Total Assets $400,000 Total Assets
AP $100,000 AP
Common Stock $100,000 Common Stock ($10 par)
Additional Paid In Capital $50,000 Additional Paid In Capital
Retained Earnings $150,000 Retained Earnings
Total Liabilities & Equity $400,000 NCI
Total Liabilities & Equity

Assume that all noncash assets have a Fair Value that is 10% greater than Book Value

Here’s the SOLUTION

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