Glass Company is thinking about acquiring Plastic Company . Glass Company is considering two methods of accomplishing control and is wondering how the accounting treatment will differ under each...

Glass Company

is thinking about acquiring

Plastic Company
.

Glass Company

is considering two methods of accomplishing control and is wondering how the accounting treatment will differ under each method.

Glass Company

has estimated that the fair values of

Plastic’s

net assets are equal to their book values, except for the equipment which is understated by Br. 20,000. The following balance sheets have been prepared on the date of acquisition:

Assets	Glass	Plastic
Cash	Br. 520,000	Br. 40,000
Accounts receivable	50,000	70,000
Inventory	50,000	100,000
Property, plant, and equipment (net)	250,000	250,000
Total assets	Br. 870,000	Br. 460,000
Liabilities and Equity
Current liabilities	Br. 140,000	Br. 80,000
Bonds payable	250,000	100,000
Stockholders’ equity:
Common stock, (Br. 100 par)	200,000	150,000
Retained earnings	280,000	130,000
Total liabilities and equity	Br. 870,000	Br. 460,000

Required:

1. Assume
   
   Glass Company
   
   purchased the net assets directly from
   
   Plastic Company
   
   for Br. 530,000 on cash

1. Prepare the entry that
   
   Glass Company
   
   would make to record the purchase.

1. Prepare the balance sheet for
   
   Glass Company
   
   immediately following the purchase.
   
   
   
   1. Assume that 100% of the outstanding stock of
      
      Plastic Company
      
      is purchased from the former stockholders for a total of Br. 530,000.
   
   
   
   


2. Prepare the entry that
   
   Glass Company
   
   would make to record the purchase.


3. State how the investment would appear on
   
   Glass’s
   
   unconsolidated balance sheet prepared immediately after the purchase.


4. Indicate how the consolidated balance sheet would appear.