Pascal Corporation Paid $225,000 for a 70% Interest in Sank

question 17

Essay

Pascal Corporation paid $225,000 for a 70% interest in Sank Corporation on January 1,2014.On that date,Sank's balance sheet accounts,at book value and fair value,were as follows:
Assets
$$\begin{array} { l l l } \text { Cash } & \$ 25,000 & \$ 25,000 \\\text { Accounts receivable-net } & 45,000 & 55,000 \\\text { Inventories } & 40,000 & 60,000 \\\text { Plant, property and equipment-net } & \underline { 140,000 } & \underline { 125,000 } \\\text { Total assets } & \underline { \$ 250,000 } & \underline { \$ 265,000}\end{array}$$ Equities
$$\begin{array} { l l } \text { Accounts payable } & \$ 40,000 &\$40,000\\\text { Common stock } & 120,000 \\\text { Retained earnings } & \$ 90,000 \\\text { Total liab. \& equity } & \$ 250,000\end{array}$$ Both companies use the parent company theory.Push-down accounting is used for the acquisition.
Required:
1.Prepare the journal entry on January 1,2014 on Sank Corporation's books.
2.Prepare a balance sheet for Sank Corporation immediately after the acquisition on January 1,2014.

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Definitions:

Gross Spread

The difference between the underwriting price received by the issuer of securities and the price at which the securities are sold to the public.

Oversubscription Privilege

A right given to current shareholders to purchase more shares of a new issue before it is offered to the public, usually at a discount.

Standby Privilege

A feature that may accompany preferred shares or bonds, allowing the holder the right to purchase additional shares at a fixed price.

Open Offer

An invitation by a company to its shareholders to purchase additional shares directly from the company at a specified price.