UNIT 4 POST PROBLEM 1 On December 31, 200X P Corporation paid $300,000 cash for 80% of the common stock of S Company which becomes a subsidiary. Following information is shown prior to the

UNIT 4 POST PROBLEM 1

On December 31, 200X P Corporation paid $300,000 cash for 80% of the

common stock of S Company which becomes a subsidiary. Following

information is shown prior to the acquisition being recorded:

P Company

Assets Liabilities and Equity

Cash 580,000 Liabilities 90,000

Inventories 60,000

Plant 340,000 Common Stock, $5pv 100,000

Paid in Capital 200,000

Retained Earnings 590,000

Total 980,000 Total 980,000

S Company

Assets Liabilities and Equity

Inventories 20,000 Liabilities 30,000

Other assets 40,000 Long Term Debt 50,000

Plant 140,000 Common Stock, $10pv 40,000

Paid in Capital 20,000

Retained Earnings 60,000

Total 200,000 Total 200,000

S market values are:

Plant $250,000

Inventory $50,000

1. Prepare the entries in journal format to record the acquisition

and post to the general edger accounts.

2. Prepare a consolidation workpaper.

3. Prepare consolidated balance sheet.

Attachment 1

Attachment 2

ATTACHMENT PREVIEW

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UNIT 4 POST PROBLEM 1
On December 31, 200X P Corporation paid $300,000 cash for 80% of
the
common stock of S Company which becomes a subsidiary.
Following
information is shown prior to the acquisition being recorded:
P Company
Assets
Liabilities and Equity
Cash
580,000
Liabilities
90,000
Inventories
60,000
Plant
340,000
Common Stock, $5pv
100,000
Paid in Capital
200,000
Retained Earnings
590,000
Total
980,000
Total
980,000
S Company
Assets
Liabilities and Equity
Inventories
20,000
Liabilities
30,000
Other assets
40,000
Long Term Debt
50,000
Plant
140,000
Common Stock, $10pv
40,000
Paid in Capital
20,000
Retained Earnings
60,000
Total
200,000
Total
200,000
S market values are:
Plant
$250,000
Inventory
$50,000
1.
Prepare the entries in journal format to record the acquisition
and post to the general edger accounts.
2.
Prepare a consolidation workpaper.
3.
Prepare consolidated balance sheet.

ATTACHMENT PREVIEW

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UNIT 4 POST PROBLEM 1 TEMPLATE
P CORPORATION AND S CO.
Working Paper for Consolidated Balance Sheet
P Corporation
12/31/200X
Consolidated Balance Sheet
Assets
Liabilities and Equity
Entry to record the purchase of S Company:
Compuation of Goodwil
P
S
Cash
Cur ent Liabilities
Investment in S Company
Corporation
Company
Debit
Credit
Consolidated
Inventory
Long Term debt
Cash
S Company Net Assets at Book Value
Assets
Other Assets
Noncontrol ing Interest
Entry in the P Corporation General Ledger to
Inventory
S Company acquisition date fair value
Cash
Plant
Common Stock 5 Par
record the purchase of 80% of S Company.
Other Assets
S Company acquisition date book value
Inventories
Paid In Capital
Plant
Fair value in excess of book value
Other Assets
Goodwil
Retained Earnings
Liabilities
Fair value adjustments to:
Investment in S
Total
Total
Cash
Long Term Debt
Plant
580,000
Net Assets at Book
Inventory
Net Assets at Market
Amount al ocated to goodwil
115,000
Plant
Goodwil
115,000
Paid $300,000 for 80%
Total Assets
Investment in S Co.
Noncontrol ing interest 20%
Goodwil Al ocation to Control ing and Noncontrol ing Interest
Acquisition date fair value
Total
Control ing
Noncontrol ing
Fair Market Value
Fair value at acquisition date
Liabilities & Equity
ENTRIES ON CONSOLIDATION WORKSHEET
Goodwil
115,000
Relative fair value of S Company net
Cur ent Liabilities
assets (80% and 20%)
Long Term Debt
Consolidation Entry S:
Goodwil
115,000
Noncontrol ing Interest
Common Stock
75,000
Paid in Capital
Control ing interest – 80%
Common Stock $5 par
Retained Earnings (Beginning)
Noncontrol ing interest – 20%
Noncontrol ing Interest
Common Stock $10 par
Investment in S Company
Goodwil
115,000
20% of 260,000 + 23,000 goodwil =
75,000
Paid In Capital
Noncontrol ing interest
Retained Earnings
Eliminate subsidiary equity
Total Liabilities & Equity
Consolidation Entry A:
Plant
Inventory
Goodwil
Investment in S Company
Noncontrol ing interest
Al ocate subsidiary acquisition date
fair value adjustments
Noncontrol ing
75,000
52,000
23,000

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