29 Jun Question 1. The Income Statements of Ruger Inc. and Nina Co. are:
Question
1. The Income Statements of Ruger Inc. and Nina Co. are:
Ruger
Nina
Sales
$1,000,000
$400,000
Cost of Goods Sold
500,000
150,000
Gross Profit
500,000
250,000
Sales and Administration Expenses
300,000
170,000
Net Income
$ 200,000
$ 80,000
==========
========
Dividends Paid
$60,000
$20,000
Compute Ruger’s Net Income based upon the following ownership of Nina Co.
a. 10%
b. 40%
c. 80%
2-7
2. Supernova Company had the following summarized balance sheet on December 31, 20X1:
Assets
$
200,000
Accounts receivable………………………………
Inventory……………………………………….
450,000
Property and plant (net)………………………….
600,000
Goodwill………………………………………..
150,000
…………………………………………Total
$1,400,000
==========
Liabilities and Equity
$
600,000
Notes payable……………………………………
Common stock, $5 par……………………………..
300,000
Paid-in capital in excess of par…………………..
400,000
Retained earnings………………………………..
100,000
…………………………………………Total
$1,400,000
==========
The fair value of the inventory and property and plant is $600,000 and $850,000, respectively.
Assume that Redstar Corporation exchanges 45,000 of its $3 par value shares of common stock, when the fair price is $4/share, for 100% of the common stock of Supernova Company. Redstar incurred direct acquisition costs of $5,000 and stock issuance costs of $5,000.
Required:
1. What journal entry will Redstar Corporation record for the investment in Supernova?
2. Prepare a supporting determination and distribution of excess schedule
3. Prepare Redstar’s elimination and adjustment entry for the acquisition of Supernova.
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