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The trial balances for Walla Corporation and Au Inc. at December 31, Year 4, just before...

The trial balances for Walla Corporation and Au Inc. at December 31, Year 4, just before the transaction described below, were as follows:

Walla Au Inc.
Current assets $ 295,000 $ 205,000
Land 615,000 465,000
Other tangible assets 515,000 285,000
Liabilities 415,000 325,000
Common shares 215,000 65,000
Retained earnings, 1/1/Year 4 615,000 255,000
Revenues 815,000 655,000
Expenses 635,000 345,000

On December 31, Year 4, Walla purchased all of the outstanding shares of Au Inc. by issuing 27,000 common shares with a market value of $30 per share. The carrying amounts of Au Inc.’s assets and liabilities were equal to fair value except for the following:

Fair
Value
Land $ 515,000
Other tangible assets 330,000
Liabilities 345,000

Required:

What are the balances for the land, other tangible assets, goodwill, investment in common shares, liabilities, common shares, and revenues after the transaction noted above on:

(a) Walla’s separate entity financial statements

(b) Au Inc.’s separate entity financial statements

(c) Walla’s consolidated financial statements

(a)
Walla separate		 (b)
Au separate		 (c)
Walla consolidated
Land $ $ $
Other tangible assets
Goodwill
Investment in common shares
Liabilities
Common shares
Revenues

Solutions

Expert Solution

Calculation of Retained earnings aa on 31st December
Walla Au Inc
Beginning balance    6,15,000.00 2,55,000.00
Add:- Addition during the year
Revenue 8,15,000.00 6,55,000.00
Less:- Expense 6,35,000.00    1,80,000.00 3,45,000.00 3,10,000.00
   7,95,000.00 5,65,000.00
Calculation of Goodwill
Issue of shares (27000*30) 8,10,000.00
Less:- Fair value of assets & liabilities
                Current assets    2,05,000.00
                Land    5,15,000.00
                Other tangible assets    3,30,000.00
                Liabilities -3,45,000.00 7,05,000.00
Goodwill 1,05,000.00
(a) Walla seperate Entity Finanacial statement as on 31st Dec
Current Assets    2,95,000.00
Land    6,15,000.00
Other Tangible Assets    5,15,000.00
Investment in Au inc    8,10,000.00
Total Assets 22,35,000.00
Current Liabilities    4,15,000.00
Common Shares    4,85,000.00 Assumed par value 10 each
Inexcess paid up capital    5,40,000.00 27000*(30-10)
Retained earnings    7,95,000.00
Total liabalities & equity 22,35,000.00
(b) Au inc seperate Entity Financial statement as on 31st Dec
Current Assets    2,05,000.00
Land    4,65,000.00
Other Tangible Assets    2,85,000.00
Total Assets    9,55,000.00
Current Liabilities    3,25,000.00
Common Shares       65,000.00
Retained earnings    5,65,000.00
Total liabalities & equity    9,55,000.00
(c) Consolidated Balacesheet
Walla Au Inc Debit Credit Consolidated
Current Assets    2,95,000.00    2,05,000.00    5,00,000.00
Land    6,15,000.00    4,65,000.00     50,000.00 11,30,000.00
Other Tangible Assets    5,15,000.00    2,85,000.00     45,000.00    8,45,000.00
Goodwill 1,05,000.00    1,05,000.00
Investment in Au Inc    8,10,000.00 8,10,000.00                    -  
Total Assets 22,35,000.00    9,55,000.00 2,00,000.00 8,10,000.00 25,80,000.00
Current Liabilities    4,15,000.00    3,25,000.00     20,000.00    7,60,000.00
Common Shares    4,85,000.00       65,000.00     65,000.00    4,85,000.00
Inexcess paid up capital    5,40,000.00    5,40,000.00
Retained earnings    7,95,000.00    5,65,000.00 5,65,000.00    7,95,000.00
Total liabalities & equity 22,35,000.00    9,55,000.00 6,30,000.00     20,000.00 25,80,000.00

ekkarill92 answered 2 years ago
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