P corporation paid 300000cash for 80percent of S corporation which becomes subsi

Question

P corporation paid 300000cash for 80percent of S corporation which becomes subsidairy. Prepare the following

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 Controlling interest - 80% Noncontrolling interest - 20% Goodwill 115,000         
              
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.              

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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