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Advanced Accounting Creation of New Subsidiary

Creation of New Subsidiary
Eagle Corporation established a subsidiary to enter into a new line of business considered to be substantially more risky than Eagle's current business. Eagle transferred the following assets and accounts payable to Sand Corporation in exchange for 5,000 share of $10 par value stock of Sand:

Cost Book Value

Cash $ 30,000 $30,000
Accounts Receivable 45,000 40,000
Inventory 60,000 60,000
Land 20,000 20,000
Buildings 300,000 260,000
Accounts Payable 10,000 10,000

Required
a) Give the journal entry that Eagle recorded for the transfer of assets and accounts payable to Sand.
b) Give the journal entry that Sand recorded for receipt of the assets and accounts payable from Eagle.

Solution Preview

(a)

Investment in Sand 465,000
Cash 30,000
AR 45,000
...

Solution Summary

The solution create a new subsidiary.

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