On January 1, 2012, P Company purchased 95% of the outstanding common stock of S
ID: 2342281 • Letter: O
Question
On January 1, 2012, P Company purchased 95% of the outstanding common stock of S Company for $160,000. At that time, Sessions' stockholders' equity consisted of common stock, $120,000; other contributed capital, $10,000; and retained earnings, $23,000. Any difference between the implied value of the company and the book value is attributable to goodwill. On December 31, 2012, the two companies' trial balances were as follows:
PERFORM USING COST METHOD, THEN PERFORM USING EQUITY METHOD
Step 1.Prepare a T-Account to keep track of P's Investment in S. Record the date of acquisision entry.
Step 2:Prepare the Computation and Allocation of Difference Schedule.
Step 3: Prepare the investment elimination entries as of the date of acquisition and year after acquisition.
Step 4: Prepare the consolidating financial statement workpaper.
P S Cash 62,000 30,000 Accounts Receivable 32,000 29,000 Inventory 30,000 16,000 Investment in Sessions Company 165,700 - Plant and Equipment 105,000 82,000 Land 29,000 34,000 Dividends Declared 20,000 20,000 Cost of Goods Sold 130,000 40,000 Operating Expenses 20,000 14,000 Total Debits 593,700 265,000 Accounts Payable 19,000 12,000 Other Liabilities 10,000 20,000 Common Stock 180,000 120,000 Other Contributed Capital 60,000 10,000 Retained Earnings, 1/1 40,000 23,000 Sales 260,000 80,000 Equity in earnings of Sessions 24,700 - Total Credits 593,700 265,000Explanation / Answer
Step:1
Step:2
Step:3
Step 4:
Investment in S: Debit$ Credit$ Jan 1 2012 160000 Investment in Subs 5700 Ending Balance 165700Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.