Reference no: EM132465416
|
AP
|
(400,000)
|
(200,000)
|
(200,000)
|
|
NP
|
(3,400,000)
|
(1,100,000)
|
(1,100,000)
|
|
Totals
|
7,800,000
|
600,000
|
1,510,000
|
|
CS - $20 par
|
(2,000,000)
|
|
|
|
CS - $5 par
|
|
(220,000)
|
|
|
APIC
|
(900,000)
|
(100,000)
|
|
|
Retained earnings, 1/1
|
(2,300,000)
|
(130,000)
|
|
|
Revenues
|
(6,000,000)
|
(900,000)
|
|
|
Expenses
|
3,400,000
|
750,000
|
|
|
Totals
|
(7,800,000)
|
(600,000)
|
|
Point 1: On December 31, Miller issues 50,000 shares of its $20 par value common stock for all fo the outstanding shares of Richmond Company.
Point 2: As part of the acquisition agreement, Miller agrees to pay the former owners of Richmond $250,000 if certain profit projections are realized over the next 3 years. Miller calculates the acquisition-date fair value of this contingency at $100,000.
Point 3: In creating this combination, Miller pays $10,000 in stock issue costs and $20,000 in accounting and legal fees.
Miller's stock has a fair value of $32 per share. Using the acquisition method:
Question 1. Prepare the necessary journal entries if Miller dissolves Richmond so it is no longer a separate legal entity.
Question 2. Now assume instead that Richmond WILL retain separate legal incorporation and maintain its own accounting system. Prepare a worksheet to consolidate the accounts of the 2 companies. Prepare the consolidation entries "5" and "A".
Question 3. Lastly, assume that Miller's stock has a fair value of $26 per share, and re-do requirement "1".