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:

  1. ​What journal entries will Redstar Corporation record for the investment in Supernova and issuance of stock?
  2. ​Prepare a supporting value analysis and determination and distribution of excess schedule​
  3. Prepare Redstar’s elimination of equity and adjustment for determination and distribution entries for the acquisition of Supernova.

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