ACC 405 Module 2 Project 2026/2027 (pdf) | Advanced Accounting | SNHU

ACC 405

Module 2 Project
Practice Problems and Solutions

Southern New Hampshire University

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ACC-405

Module Two Practice Problems and Solutions

Problem 1. P Company purchased 80% of the outstanding common stock of S Company on January 2, 2020, for $380,000. Balance sheets for P Company
and S Company immediately after the stock acquisition were as follows:


P Company S Company
Current assets $ 166,000 $ 96,000
Investment in S Company 380,000 -0-
Plant and equipment (net) 560,000 224,000
Land 40,000 120,000
$1,146,000 $440,000

Current liabilities $ 120,000 $ 44,000
Long-term notes payable -0- 36,000
Common stock 480,000 160,000
Other contributed capital 244,000 64,000
Retained earnings 302,000 136,000
$1,146,000 $440,000

S Company owed P Company $16,000 on open account on the date of acquisition.

Required:

Prepare a consolidated balance sheet for P and S Companies on the date of acquisition. Any difference between the value implied by the purchase price
of the investment and the book value of net assets acquired relates to subsidiary land. The book values of S Company's other assets and liabilities are
equal to their fair values.


Answer:

P COMPANY AND SUBSIDIARY

Consolidated Balance Sheet

January 2, 2020




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