Equity transfer situations. KC Company is issuing 110,000 shares of its common stock for the 100,000 outstanding shares of Hill Company in a pooling of interests. KC stockholders’ equity is as follows:
|
Common stock |
$1,000,000 |
|
Paid in capital in excess of par |
200,000 |
|
Retained earnings |
600,000 |
The balance sheet of Hill Company at the time of the pooling is as follows:
|
Assets |
Liabilities and Equity |
||
|
Cash |
$50,000 |
Accounts payable |
$25,000 |
|
Inventory |
75,000 |
Note payable |
100,000 |
|
Equipment (net) |
180,000 |
Common stock, $1 par |
100,000 |
|
Plant (net) |
215,000 |
Paid in capital in excess of par |
120,000 |
|
Retained earnings |
175,000 |
||
|
Total assets |
$520,000 |
Total liabilities and equity |
$520,000 |
Prepare the pooling entry for each of the following independent cases:
1. The par value of KC Company’s shares is $2.
2. The par value of KC Company’s shares is $5.
Suggestion: Use equity transfer diagrams.