Question

Tyrol Company creates a subsidiary, Venice Company. Tyrol transfers cash of $50,000, land with both a cost and book value of $175,000, and a building with a cost of $150,000 and a book value of $100,000 to Venice, in exchange for all 500,000 shares of Venice’s $1 par common stock. Tyrol’s journal entry to record the transfer would include:

Answer 1

Answer:

The journal entry is provided below:

Explanation:

The journal entry which is to be recorded for transfer is as:

Common Stock A/c............................Dr     $500,000

       Land A/c...........................................Cr      $175,000

       Building A/c.....................................Cr       $150,000

        Cash A/c...........................................Cr      $50,000

       Paid in Capital A/c...........................Cr      $125,000

Working Note:

Common Stock A/c = Number of Shares × Rate per share

= 500,000 × $1

= $500,000

Paid in Capital A/c = Common stock -(Land + Building +Cash)

= $500,000 - ($175,000 + $150,000 + $50,000)

= $500,000 - $375,000

= $125,000

Note: As the options are missing, so providing the journal entry.