Supernova Company had the following summarized balance sheet on December 31 of the current year:
| Assets | |
| Accounts receivable | $ 350,000 |
| Inventory | 450,000 |
| Property and plant (net) | 600,000 |
| Total | $1,400,000 |
| Liabilities and Equity | |
| Notes payable | $ 600,000 |
| Common stock, $5 par | 300,000 |
| Paid-in capital in excess of par | 400,000 |
| Retained earnings | 100,000 |
| Total | $1,400,000 |
The fair value of the inventory and property and plant is $600,000 and $850,000, respectively.
Assume that Redstar Corporation exchanges 75,000 of its $3 par value shares of common stock, when the fair price is $20 per share, for 100% of the common stock of Supernova Company.
Required:
- What journal entries will Redstar Corporation record for the investment in Supernova and issuance of stock?
- Prepare a supporting value analysis and determination and distribution of excess schedule
- Prepare Redstar’s elimination of equity and adjustment for determination and distribution entries for the acquisition of Supernova.
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