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In: Accounting
Albuquerque, Inc., acquired 24,000 shares of Marmon Company several years ago for $780,000. At the acquisition...
Albuquerque, Inc., acquired 24,000 shares of Marmon Company several years ago for $780,000. At the acquisition date, Marmon reported a book value of $800,000, and Albuquerque assessed the fair value of the noncontrolling interest at $32,500. Any excess of acquisition-date fair value over book value was assigned to broadcast licenses with indefinite lives. Since the acquisition date and until this point, Marmon has issued no additional shares. No impairment has been recognized for the broadcast licenses.
At the present time, Marmon reports $820,000 as total stockholders’ equity, which is broken down as follows:
| Common stock ($14 par value) | $ | 350,000 |
| Additional paid-in capital | 360,000 | |
| Retained earnings | 110,000 | |
| Total | $ | 820,000 |
View the following as independent situations:
-
a. & b. Marmon sells 15,000 and 7,000 shares of previously unissued common stock to the public for $40 and $20 per share. Albuquerque purchased none of this stock. What journal entry should Albuquerque make to recognize the impact of this stock transaction? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round your intermediate calculations.)
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| Journal entry | ||||||
| s.no | Particulars | Debit | Credit | |||
| 1) | investment in marmon | 60300 | ||||
| additional paid in capital | 60300 | |||||
| (to record adjustment of additional share by subsidiary) | ||||||
| 2) | additional paid in capital | 69825 | ||||
| investment in marmon | 69825 | |||||
| (to record adjustment of additional share by subsidiary) | ||||||
| Working Notes | ||||||
| Calculation of increase in additional paid in capital | ||||||
| at the beginning acquisition interest (24000/25000***) | 96% | |||||
| till date of fair value adjustment (780000+32500)+(820000-800000) | 832500 | |||||
| after stock issue adjustment (832500+15000*40) | 1432500 | |||||
| interest after issue of share 24000/25000+15000 | 60% | |||||
| equity balance before share issue (780000+20000*96%) | 799200 | |||||
| implied book value of investment -after issue of share (1432500*60%) | 859500 | |||||
| additional paid in capital - increased | 60300 | |||||
| at the beginning acquisition interest (24000/25000) | 96% | |||||
| till date of fair value adjustment (780000+32500)+(820000-800000) | 832500 | |||||
| after stock issue adjustment (832500+7000*20) | 972500 | |||||
| interest after issue of share 24000/25000+7000 | 75% | |||||
| equity balance before share issue (780000+20000*96%) | 799200 | |||||
| implied book value of investment -after issue of share (972500*75%) | 729375 | |||||
| additional paid in capital - decrease | 69825 | |||||
| 25000 = 350000/14 | ||||||
ekkarill92 answered 2 years agoRelated Solutions
Albuquerque, Inc., acquired 24,000 shares of Marmon Company several years ago for $810,000. At the acquisition...
Albuquerque, Inc., acquired 24,000 shares of Marmon Company
several years ago for $810,000. At the acquisition date, Marmon
reported a book value of $880,000, and Albuquerque assessed the
fair value of the noncontrolling interest at $270,000. Any excess
of acquisition-date fair value over book value was assigned to
broadcast licenses with indefinite lives. Since the acquisition
date and until this point, Marmon has issued no additional shares.
No impairment has been recognized for the broadcast licenses.
At the present time,...
Albuquerque, Inc., acquired 24,000 shares of Marmon Company several years ago for $720,000. At the acquisition...
Albuquerque, Inc., acquired 24,000 shares of Marmon Company
several years ago for $720,000. At the acquisition date, Marmon
reported a book value of $870,000, and Albuquerque assessed the
fair value of the noncontrolling interest at $180,000. Any excess
of acquisition-date fair value over book value was assigned to
broadcast licenses with indefinite lives. Since the acquisition
date and until this point, Marmon has issued no additional shares.
No impairment has been recognized for the broadcast licenses. At
the present time,...
Albuquerque, Inc., acquired 24,000 shares of Marmon Company several years ago for $720,000. At the acquisition...
Albuquerque, Inc., acquired 24,000 shares of Marmon Company
several years ago for $720,000. At the acquisition date, Marmon
reported a book value of $500,000, and Albuquerque assessed the
fair value of the noncontrolling interest at $30,000. Any excess of
acquisition-date fair value over book value was assigned to
broadcast licenses with indefinite lives. Since the acquisition
date and until this point, Marmon has issued no additional shares.
No impairment has been recognized for the broadcast licenses.
At the present time,...
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reported a book value of $820,000, and Albuquerque assessed the
fair value of the noncontrolling interest at $250,000. Any excess
of acquisition-date fair value over book value was assigned to
broadcast licenses with indefinite lives. Since the acquisition
date and until this point, Marmon has issued no additional shares.
No impairment has been recognized for the broadcast licenses.
At the present time,...
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Albuquerque, Inc., acquired 27,000 shares of Marmon Company
several years ago for $900,000. At the acquisition date, Marmon
reported a book value of $980,000, and Albuquerque assessed the
fair value of the noncontrolling interest at $100,000. Any excess
of acquisition-date fair value over book value was assigned to
broadcast licenses with indefinite lives. Since the acquisition
date and until this point, Marmon has issued no additional shares.
No impairment has been recognized for the broadcast licenses.
At the present time,...
Albuquerque, Inc., acquired 27,000 shares of Marmon Company several years ago for $900,000. At the acquisition...
Albuquerque, Inc., acquired 27,000 shares of Marmon Company
several years ago for $900,000. At the acquisition date, Marmon
reported a book value of $980,000, and Albuquerque assessed the
fair value of the noncontrolling interest at $100,000. Any excess
of acquisition-date fair value over book value was assigned to
broadcast licenses with indefinite lives. Since the acquisition
date and until this point, Marmon has issued no additional shares.
No impairment has been recognized for the broadcast licenses.
At the present time,...
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several years ago for $900,000. At the acquisition date, Marmon
reported a book value of $980,000, and Albuquerque assessed the
fair value of the noncontrolling interest at $100,000. Any excess
of acquisition-date fair value over book value was assigned to
broadcast licenses with indefinite lives. Since the acquisition
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