Question

Q2.Parent Company acquired 90% of Son Inc. on January 31, 20X2 in exchange for cash. The book value of Son's individual assets and liabilities approximated their acquisition-date fair values. On the date of acquisition, Son reported the following: During the year Son Inc. reported $310,000 in net income and declared $15,000 in dividends. Parent Company reported $520,000 in net income and declared $25,000 in dividends. Parent accounts for their investment using the equity method. Required: 1. What journal entry will Parent make on the date of acquisition to record the investment in Son Inc.

Answer 1

Answer:

Journal entry that  Parent will make on the date of acquisition to record the investment in Son Inc. is $1035000.

Explanation:

Journal entry Parent make on the date of acquisition to record the investment in Son Inc.

The net worth of Son’s Inc. is $ 1150000. The parent acquires 90 % of it . So we assume that 90 % stock is held by parent for $ 1035000.