ACC450 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: 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
Cash
Inventories
Plant
Total
580,000
60,000
340,000
980,000
Liabilities and Equity
Liabilities
Common Stock, $5pv
Paid in Capital
Retained Earnings
Total
90,000
100,000
200,000
590,000
980,000
S Company
Assets
Inventories
Other assets
Plant
Total
20,000
40,000
140,000
200,000
S market values are:
Plant
Inventory
Liabilities and Equity
Liabilities
30,000
Long Term Debt
50,000
Common Stock, $10pv
40,000
Paid in Capital
20,000
Retained Earnings
60,000
Total
200,000
$250,000
$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.
UNIT 4 POST PROBLEM 1 TEMPLATE
P CORPORATION AND S CO.
Working Paper for Consolidated Balance Sheet
12/31/200X
Entry to record the purchase of S Company:
Investment in S Company
Cash
Entry in the P Corporation General Ledger to
record the purchase of 80% of S Company.
Compuation of Goodwill
Cash
580,000
Investment in S Co.
ENTRIES ON CONSOLIDATION WORKSHEET
Consolidation Entry S:
Common Stock
Paid in Capital
Retained Earnings (Beginning)
Investment in S Company
Noncontrolling interest
Eliminate subsidiary equity
P
Corporation
S Company Net Assets at Book Value
Inventory
Other Assets
Plant
Liabilities
Long Term Debt
Net Assets at Book
Net Assets at Market
Paid $300,000 for 80%
Noncontrolling interest 20%
Acquisition date fair value
Fair Market Value
Goodwill
115,000
S Company acquisition date fair value
S Company acquisition date book value
Fair value in excess of book value
Fair value adjustments to:
Plant
Inventory
Amount allocated to goodwill
S
Company
Debit
Credit
Consolidated
Assets
Cash
Inventories
Other Assets
Investment in S
115,000
Goodwill Allocation to Controlling and Noncontrolling Interest
Total
Controlling
Fair value at acquisition date
Relative fair value of S Company net
assets (80% and 20%)
Goodwill
115,000
Plant
Goodwill
Total Assets
P Corporation
Consolidated Balance Sheet
Assets
Liabilities and Equity
Cash
Current Liabilities
Inventory
Long Term debt
Other Assets
Noncontrolling Interest
Plant
Common Stock 5 Par
Paid In Capital
Goodwill
Retained Earnings
Total
Total
115,000
Noncontrolling
Liabilities & Equity
Current Liabilities
Long Term Debt
Noncontrolling Interest
75,000
Controlling interest – 80%
Noncontrolling interest – 20%
Goodwill
115,000
Noncontrolling Interest
20% of 260,000 + 23,000 goodwill =
75,000
Common Stock $5 par
Common Stock $10 par
Paid In Capital
Retained Earnings
Total Liabilities & Equity
Consolidation Entry A:
Plant
Inventory
Goodwill
Investment in S Company
Noncontrolling interest
Allocate subsidiary acquisition date
fair value adjustments
Noncontrolling
75,000
52,000
23,000
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