Solution of 1st Question

1) Prepare the journal entry to record the issuance of common stock by Jobe.

Particulars Amount $

Investment in lake's corp. 1,890,000

Common Stock (Par value)
Additional paid in capital

-2) Prepare the journal entry to record the payment of combination costs.

Particulars Amount $

Investment in lake's corp. (Combination Cost) 34,000

Paid in Capital ( Stock issuance Cost) 24,000
Cash

-3) Determine consolidated net income for the year ended December 31, 20x2.

Particulars Amount $

Revenues of Jobe's 1,300,000

Expenses of Jobe's (1,180,000)
Consolidated Net Income 120,000

Note;
In a purchase subsdiary revenues and expenses are not consolidated prior
to the date of acquisition.

-4) Determine consolidated additional paid-in capital at December 31, 20x2. (

Particulars Amount $

Jobe's additional paid in Capital prior to acquisition 90,000

Additional paid in capital arising from the purchase
transaction (54,000 *$25) 1,350,000
Less Stock issuance cost (24,000)
Consolidated Additional paid in Capital 1,416,000
Solution of 2nd Question

1) Prepare the journal entry to record the issuance of common stock by Metzger.

Particulars Amount $

Investment in Ortiz's corp. 2,320,000

Common Stock (Par value)
Additional paid in capital

-2) Prepare the journal entry to record the payment of combination costs.

Particulars Amount $

Investment in Ortiz's corp. (Combination Cost) 38,000

Paid in Capital ( Stock issuance Cost) 28,000
Cash

-3) Determine consolidated net income for the year ended December 31, 20x2.

Particulars Amount $

Revenues of Metzger's 1,800,000

Expenses of Metzger's (1,580,000)
Consolidated Net Income 220,000

Note;
In a purchase subsdiary revenues and expenses are not consolidated prior
to the date of acquisition.

-4) Determine consolidated additional paid-in capital at December 31, 20x2. (

Particulars Amount $
 Metzger's additional paid in Capital prior to acquisition 110,000
Additional paid in capital arising from the purchase
transaction (58,000 *$30) 1,740,000
Less Stock issuance cost (28,000)
Consolidated Additional paid in Capital 1,822,000

Solution of 3rd Question

As the question no. 3 is same as question no. 2 therefore the solution is same.
Amount $

540,000
1,350,000

Amount $

58,000
Amount $

580,000
1,740,000

Amount $

66,000
Net income $120,000 $210,000

Retained earnings, January 1, 20X2 700,000 500,000

Net income (above) 120,000 210,000
Dividends paid (110,000) (110,000)
Retained earnings, December 31, 20X2 $710,000 $600,000

Cash $160,000 $120,000

Receivables and inventory 240,000 240,000
Buildings (net) 700,000 350,000
Equipment (net) 700,000 600,000
Total assets $1,800,000 $1,310,000

Liabilities $250,000 $195,000

Common stock 750,000 430,000
Additional paid-in capital 90,000 85,000
Retained earnings, December 31, 20X2 (above) 710,000 600,000
Total liabilities and stockholders' equity $1,800,000 $1,310,000

On December 31, 20X2, Jobe issued 54,000 new shares of its $10 par value stock in exchange
for all the outstanding shares of Lake. Jobe's shares had a fair value on that date of $35 per
share. Jobe paid $34,000 to an investment bank for assisting in the arrangements. Jobe also paid
$24,000 in stock issuance costs to effect the acquisition of Lake. Lake will retain its
incorporation.

-1) Prepare the journal entry to record the issuance of common stock by Jobe.
-2) Prepare the journal entry to record the payment of combination costs.
-3) Determine consolidated net income for the year ended December 31, 20x2.
-4) Determine consolidated additional paid-in capital at December 31, 20x2. (