Consolidated Balance Sheet, Stock Purchase
On January 2, 2011, Prunce Company acquired 90% of the outstanding common stock of Sun Company for $192,000 cash. Just before the acquisition, the balance sheets of the two companies were as follows:
| Aimee | Sun | |
| Cash | $260,000 | $ 64,000 |
| Accounts receivable (net) | 142,000 | 23,000 |
| Inventory | 117,000 | 54,000 |
| Plant and equipment (net) | 386,000 | 98,000 |
| Land | 63,000 | 32,000 |
| Total asset | $968,000 | $271,000 |
| Accounts payable | $104,000 | $ 47,000 |
| Mortgage payable | 72,000 | 39,000 |
| Common stock, $2 par value | 400,000 | 70,000 |
| Other contributed capital | 208,000 | 20,000 |
| Retained earnings | 184,000 | 95,000 |
| Total equities | $968,000 | $271,000 |
The fair values of Sun Company”s assets and liabilities are equal to their book values with the exception of land.
Required:
- Prepare a journal entry to record the purchase of Sun Company”s common stock.
- Prepare a consolidated balance sheet at the date of acquisition.
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