On December 31, 20X6, Greenly Corporation and Lindy Company entered into a busin

Question

On December 31, 20X6, Greenly Corporation and Lindy Company entered into a business combination in which Greenly acquired all of Lindy’s common stock for $957,000. At the date of combination, Lindy had common stock outstanding with a par value of $117,000, additional paid in capital of $412,000, and retained earnings of $175,000. The fair values and book values of all Lindy’s assets and liabilities were equal at the date of combination, except for the following:

The buildings had a remaining life of 20 years, and the equipment was expected to last another 10 years. In accounting for the business combination, Greenly decided to use push-down accounting on Lindy’s books.

During 20X7, Lindy earned net income of $99,000 and paid a dividend of $68,000. All of the inventory on hand at the end of 20X6 was sold during 20X7. During 20X8, Lindy earned net income of $101,000 and paid a dividend of $68,000.

Required:

a.

Record the acquisition of Lindy's stock on Greenly's books on December 31, 20X6. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

*Record the initial investment in Lindy Co.

b.

Record any entries that would be made on December 31, 20X6, on Lindy’s books related to the business combination if push-down accounting is employed. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

*Record the evaluation of the assets of Lindy Co.

c.

Present all consolidating entries that would appear in the worksheet to prepare a consolidated balance sheet immediately after the combination. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

*Record the basic consolidation entry.

d.

Present all entries that Greenly would record during 20X7 related to its investment in Lindy if Greenly uses the equity-method of accounting for its investment. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

*Record the dividend received from Lindy Co.

e.

Present all consolidating entries that would appear in the worksheet to prepare a full set of consolidated financial statements for the year 20X7. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

*Record the basic consolidation entry.

f.

Present all consolidating entries that would appear in the worksheet to prepare a full set of consolidated financial statements for the year 20X8. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

*Record the basic consolidation entry.

Book Value Fair Value   Inventory $ 56,000 $ 61,000   Land 90,000 170,000   Buildings 412,000 515,000   Equipment 515,000 580,000

Explanation / Answer

Part A

Part B

Equipment (580000-515000)

Revaluation capital

65000

253000

Part C

Part D

Part E

Dividends declared

Investment in Lindy Company stock (balancing figure)

68000

98800p

Part F

Account titles debit credit Investment in Lindy Company stock 957000 Cash 957000

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