On December 31, 200X P Corporation paid $300,000 cash for 80% of the common stoc
ID: 2418631 • Letter: O
Question
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.
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.
Explanation / Answer
Market value Plant 250,000 Inventory 50,000 Consolidation Workpaper Purchase price paid 300,000 Net Assets of S Plant 250,000 Inventory 50,000 Other Assets 40,000 Total Assets 340,000 Less Liabilitues Liabilities 30,000 Long Term Debt 50,000 Total Liabilities 80,000 Net Assests of S 260,000 80% share acquired value 208,000 Goodwill 92,000 Minority Interest @20% of net assets 52,000 Journal Entry to record transaction Date Account Title Dr $ Cr $ Dec 31,200X Investment in S 300,000 Cash 300,000 Invetsment in S A/c Date Details Amt Date Details Amt Dec 31,200X To cash paid for 80% share purchase 300,000 Cash A/c. Date Details Amt Date Details Amt Dec 31,200X By Cash Investment in S 300,000 P Company Consolidated Balance Sheet as on Dec 31 200x Assets Liabilities and Equity Cash 280,000 Liabilities 120,000 Inventories 110,000 Long term Debt 50000 Plant 590,000 Common Stock, $5pv 100,000 Other Assets 40000 Paid in Capital 200,000 Goodwill 92000 Retained Earnings 590,000 Minority Interest 52,000 Total 1,112,000 Total 1,112,000
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