20) Elltol Company Ingrad Company
Balance Sheet Balance Sheet
January 1, 2X13 January 1, 2X13
Cash $ 40 Cash $120
Net Fixed Assets 90 Net Fixed Assets 130
Total Assets $130 Total Assets $250
Accounts Payable $ 20 Accounts Payable $ 30
Long-term Bonds Payable 60 Long-term Bonds Payable 100
Stockholders' Equity 50 Stockholders' Equity 120
Total Liab. & Total Liab. &
Stockholders' Equity $130 Stockholders' Equity $250
On January 1, 2X13, Ingrad Company acquired 100% of the outstanding shares of Elltol Company for $50 in cash. During 2X13, Elltol Company had net income of $10, and Ingrad Company had net income of $25. All net income for both companies is in the form of additional cash.
Prepare the following:
a. The journal entry necessary for Ingrad Company on January 1, 2X13.
b. The journal entry necessary for Elltol Company on January 1, 2X13.
c. The consolidated balance sheet immediately after the acquisition.
d. The one elimination entry necessary on December 31, 2X13, assuming none of the income for either company resulted from intercompany sales.
e. The consolidated balance sheet at December 31, 2X13.
21) Harris Enterprises owns 100% of the outstanding stock of Staton Company. The following transactions occurred during 2X13:
a) Harris Enterprises sold inventory costing $2,750 on account to Staton Company for $3,800. As of year-end, the amount due had not been paid. Harris Enterprises and Staton Company use a perpetual inventory system.
b) Staton Company borrowed $8,000 from Harris Enterprises on December 31, 2X13, and signed a 2-year note.
For each item, prepare the necessary intercompany elimination entry that is needed, if at all, in order to prepare a year-end consolidated balance sheet. Be certain to specifically identify whether an account is on the books of Harris Enterprises or Staton Company.
22) List and explain why a company would create subsidiaries instead of integrating the smaller companies into the larger parent to create a single entity.
23) Describe spin-offs including the benefits to spinning off a segment.
24) Describe reasons and benefits to corporate mergers.