Supernova Company Had the Following Summarized Balance Sheet on December

question 5

Essay

Supernova Company had the following summarized balance sheet on December 31 of the current year:
The fair value of the inventory and property and plant is $600,000 and $850,000, respectively.
Assume that Redstar Corporation exchanges 75,000 of its $3 par value shares of common stock, when the fair price is $20 per share, for 100% of the common stock of Supernova Company. Redstar incurred acquisition costs of $5,000 and stock issuance costs of $5,000.
Required:
a.What journal entries will Redstar Corporation record for the investment in Supernova and issuance of stock?
b.Prepare a supporting value analysis and determination and distribution of excess schedule
c.Prepare Redstar's elimination and adjustment entry for the acquisition of Supernova.

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Definitions:

Lump Sum

A one-time payment made at a specific moment, rather than multiple smaller payments spread over time.

Savings Options

Various financial vehicles available for setting aside money, such as savings accounts, certificates of deposit, and money market funds, with the aim of earning a return.

Compounded Weekly

Refers to interest earned or paid that is calculated on a weekly basis, with each week's interest added to the principal amount.

Emergency Fund

A reserve of money set aside to cover unexpected expenses or financial emergencies.