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

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Business Finance

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

Using the data in the Option 1 Spreadsheet (linked at the bottom of the page), 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:

  1. Select an accounting method (either cost or equity) and explain why you selected this method
  2. Perform the required journal entries
  3. Complete the consolidation worksheet
  4. 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.

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Assume that Big Company decides to acquire 100% Little Company for $500 Big Company Balance Sheet Assets, Liabilities & Equities Book Value 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 AP $100,000 Common Stock ($10 par) $450,000 Additional Paid In Capital $600,000 Retained Earnings $1,450,000 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 Accumulated Depreciation -$150,000 Patent $0 Total Assets $400,000 AP $100,000 Common Stock $100,000 Additional Paid In Capital $50,000 Retained Earnings $150,000 Total Liabilities & Equity $400,000 Assume that Book Value = Fair Value Prepare the journal entries for acquiring 100% of the net as Little, accounting for it as a merger. Account DR Which accounting method is most appropriate for represen investment of this type? Prepare the journal entries for a 100% of Little Compan accounting for it using the equity method Account DR Prepare the journal entries for a 100% Acquisition by iss 10,000 shares of Big Company Stock Account DR Company for $500,000. Prepare the appropriate journal entries. uiring 100% of the net assets of or it as a merger. CR appropriate for representing an this type? a 100% of Little Company, the equity method CR 100% Acquisition by issuing g Company Stock CR Prepare Elimination Entries for Stock Acquisition Account DR CR Big Company Balance Sheet (Consolidated) Assets, Liabilities & Equities Book Value
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