On January 1, 2014, Plate Company purchased a 90% interest in the common stock o
ID: 2522971 • Letter: O
Question
On January 1, 2014, Plate Company purchased a 90% interest in the common stock of Set Company for $681,200, an amount $21,500 in excess of the book value of equity acquired. The excess relates to the understatement of Set Company’s land holdings.
Excerpts from the consolidated retained earnings section of the consolidated statements workpaper for the year ended December 31, 2014, follow:
Set Company
Consolidated Balances
1/1/14 retained earnings
177,300
953,400
Net income from above
133,600
393,400
Dividends declared
(50,600
)
(81,200
)
12/31/14 retained earnings to the balance sheet
260,300
1,265,600
Set Company’s stockholders’ equity is composed of common stock and retained earnings only.
Prepare the eliminating entries required for the preparation of a consolidated statements workpaper on December 31, 2014, assuming the use of the cost method. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,125.)
Set Company
Consolidated Balances
1/1/14 retained earnings
177,300
953,400
Net income from above
133,600
393,400
Dividends declared
(50,600
)
(81,200
)
12/31/14 retained earnings to the balance sheet
260,300
1,265,600
Explanation / Answer
Computation of difference between Implied value and book value Particulars Parent subsy entire value Purchase price & implied value 681200 75689 756889.00 less- Book value (681200-21500) 659700 73300 733000 Difference (implied and book value 21500 2389 23889.00 dallocated to undervalu for land -21500 -2389 -23889.00 balance 0 0 0 Equity acquired by the parent company 450,000 659700 Equity acquired for the whole company 500,000 733000 Common stock ?????? (450,000) 659700 RE. 1/1 (Given) 50,000 173300 Journal 1 Investment in subsy company 74700 retained earning 1-1-parent company 74700 (260300-177300= 83000*90%) 2 dividend income 45540 dividend declared 45540 (50600*90%) 3 common stock(681200-21500) 659700 retained earning1/1/14 260300 land 23889 investment (681200+74700) 755900 NCI(75889+112100) 187989
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