PROBLEM 2:
GAGA AND BIEBER COMPANIES HAVE THE FOLLOWING BALANCE SHEETS ON JANUARY 1, 2016
$
$
$
$
$
$
BIEBER
500,000.00
200,000.00
1,000,000.00
100,000.00
200,000.00
1,800,000.00
$
5,000,000 $
800,000.00
$
$
10,000,000 $
10,000,000 $
600,000.00
400,000.00
CASH
A/R
EQUIPMENT
A/D EQUIPMENT
LAND
TOTAL ASSETS
$
$
$
$
$
$
NOTE PAYABLE
COMMON STOCK
RETAINED EARNINGS
GAGA
10,000,000
5,000,000
10,000,000
1,000,000
1,000,000
25,000,000
ON JANUARY 2ND GAGA ACQUIRED ALL OF THE OUTSTANDING STOCK OF BIEBER COMPANY FROM BIEBER’S STOCKHOLDERS BY ISSUING 500
SHARES OF GAGA STOCK WHEN GAGA HAD A MARKET VALUE OF $5 PER SHARE.
ON JANUARY 2 ND THE FAIR MARKET VALUE OF BIEBE
EQUIPMENT WAS $1,100,000 AND THE FAIR MARKET VALUE OF BIEBER’S LAND WAS $50,000. BIEBER WILL CONTINUE TO EXIST AFTER THIS
ACQUISITION.
REQUIRED:
A.)
B.)
C.)
D.)
MAKE THE JOURNAL ENTRY GAGA MAKES WHEN IT ACQUIRES ALL OF THE STOCK OF BIEBER BY ISSUING ITS 500,0
MAKE THE JOURNAL ENTRY BIEBER MAKES WHEN ITS STOCKHOLDERS SELL THEIR STOCK TO GAGA FOR GAGA STO
PREPARE A CONSOLIDATED BALANCE SHEET ON JANUARY 3RD
PREPARE ANY NECESSARY WORKSHEET ENTRIES NEEDED TO CONSTRUCT THE CONSOLIDATED BALANCE SHEET
PROBLEM 3:
PROBLEM 2: GAGA AND BIEBER COMPANIES HAVE THE FOLLOWING BALANCE SHEETS ON JANUARY 1, 2016
$
$
$
$
$
$
BIEBER
500,000.00
200,000.00
1,000,000.00
100,000.00
200,000.00
1,800,000.00
$
5,000,000 $
800,000.00
$
$
10,000,000 $
10,000,000 $
600,000.00
400,000.00
CASH
A/R
EQUIPMENT
A/D EQUIPMENT
LAND
TOTAL ASSETS
$
$
$
$
$
$
NOTE PAYABLE
COMMON STOCK
RETAINED EARNINGS
GAGA
10,000,000
5,000,000
10,000,000
1,000,000
1,000,000
25,000,000
ON JANUARY 2ND GAGA ACQUIRED 80% OF THE OUTSTANDING STOCK OF BIEBER COMPANY FROM BIEBER’S STOCKHOLDERS BY ISSUING 500
SHARES OF GAGA STOCK WHEN GAGA HAD A MARKET VALUE OF $5 PER SHARE. ON JANUARY 2 ND THE FAIR MARKET VALUE OF BIEBER’S
EQUIPMENT WAS $1,100,000 AND THE FAIR MARKET VALUE OF BIEBER’S LAND WAS $50,000. BIEBER WILL CONTINUE TO EXIST AFTER THIS
ACQUISITION
REQUIRED:
A) MAKE THE JOURNAL ENTRY GAGA MAKES WHEN IT ACQUIRES 80% OF THE STOCK OF BIEBER BY ISSUING ITS 500,000 SHARES
B) MAKE THE JOURNAL ENTRY BIEBER MAKES WHEN ITS STOCKHOLDERS SELL 80% OF THEIR STOCK TO GAGA FOR GAGA STOCK
C) PREPARE A CONSOLIDATED BALANCE SHEET ON JANUARY 3RD
D) PREPARE ANY NECESSARY WORKSHEET ENTRIES NEEDED TO CONSTRUCT THE CONSOLIDATED BALANCE SHEET
PROBLEM 4 (A CONTINUATION OF PROBLEM 3)
AT THE END OF 2016 GAGA AND BIEBER HAD THE FOLLOWING FINANCIAL STATEMENTS:
INCOME STATEMENT
SALES
SALARY EXPENSE
DEPRECIATION EXP
INVESTMENT INC.
INCOME
$
$
$
GAGA
3,000,000
400,000
1,000,000
a
b
$
$
$
$
$
BIEBER
200,000
50,000
100,000
50,000
BALANCE SHEET
CASH
A/R
EQUIPMENT
A/D EQUIPMENT
LAND
INVESTMENT IN BIEBER
TOTAL ASSETS
$
$
$
$
$
NOTE PAYABLE
COMMON STOCK
RETAINED EARNINGS
11,000,000
5,000,000
10,000,000
2,000,000
1,000,000
$
$
$
$
$
$
$
630,000
200,000
1,000,000
200,000
200,000
1,830,000
$
50,000,000 $
800,000
$
12,500,000 $
$
E
600,000
430,000
C
D
THE EQUIPMENT FOR BOTH BIEBER AND GAGA ARE DEPRECIATED USING STRAIGHT LINE WITH A 10 YEAR LIFE (FROM DATE OF PURCHASE)
WITH NO SALVAGE VALUE
HINT: DON’T FORGET DIVIDENDS, AND REMEMBER GAGA ONLY OWNS 80% OF BIEBER.
REQUIRED:
A.)
FILL IN THE MISSING VALUES A TO E ON GAGA’S FINANCIAL STATEMENTS…YOU CAN USE ANY METHOD YOU CHOO
(INITIAL VALUE, PARTIAL EQUITY OR FULL EQUITY) BUT YOU MUST LET ME KNOW WHICH METHOD YOU ARE USIN
B.)
C.)
D.)
MAKE THE JOURNAL ENTRIES GAGA MADE IN 2016 (AFTER ACQUISITION) DUE TO ITS INVESTMENT IN BIEBER
PREPARE A CONSOLIDATED INCOME STATEMENT FOR 2016
PREPARE A CONSOLIDATED BALANCE SHEET FOR 2016
E.)
SHOW THE WORKSHEET ENTRIES NEEDED TO PREPARE THE CONSOLIDATED BALANCE SHEET AND INCOME
STATEMENT
UING 500,000
E OF BIEBER’S
FTER THIS
G ITS 500,000 SHARES
GAGA STOCK
SHEET
UING 500,000
EBER’S
FTER THIS
00 SHARES
GA STOCK
RCHASE)
YOU CHOOSE
ARE USING
IEBER
ME
