On January1, 2016 picasso corporation acquired 90 percent of sydney corporation
ID: 2525933 • Letter: O
Question
On January1, 2016 picasso corporation acquired 90 percent of sydney corporation for $180,000 cash. Sydney reported net income of $30,000 and dividends of $10,000 for 2017. On January 1,2016, Sydney reported common stock outstanding of $100,000 and retained earnings of $60,000. It held equipment with a net book value of $50,000 and a market value of $80,000 at the date of combination, and had a remaining economic life of five years. There is no difference between book value and fair value for other assets or liabilities. Picasso use the equity method in accounting for investment in Sydney.
a- Provide the journal entries recorded by picasso during 2017 on its books if it accounts for its investment in Sydney.
b- Provide all consolidation entries needed at December 31,2017, to prepare consolidated financial statements.
Explanation / Answer
based on the preceding information, the amount of goodwill reported in the consolidated financial statements prepared immediately after the combination is $20,000
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