Problem 3-1 The two following separate cases show the financial position of a pa

Question

Problem 3-1 The two following separate cases show the financial position of a parent company and its subsidiary company on November 30, 2014, just after the parent had purchased 90% of the subsidiary's stock Case I Case Il P Company P Company $ 780,200 188,700 1,208,300 69,400 $2,246,600 S Company 872,000 $262,400 S Company $279,300 Current assets Investment in S Company Long-term assets Other assets 188,700 1,394,700 89,800 $2,545,200 398,500 40,100 $701,000 398,500 70,600 $748,400 Total Current liabilities Long-term liabilities Common stock Retained earnings $639,000 857,300 595,700 453,200 $2,545,200 $269,300 291,300 180,600 $ 701,400 927,100 595,700 22,400 $2,246,600 $259,900 272,400 180,600 35,500 $748,400 (40,200) Total $701,000

Explanation / Answer

Solution:

Preparing a November 30, 2014 Consolidated Balance Sheet Workpaper:

P COMPANY AND SUBSIDIARY

Consolidated Balance Sheet Workpaper

November 30, 2014

P COMPANY AND SUBSIDIARY

Consolidated Balance Sheet Workpaper

November 30, 2014

Case I P Company S Company Eliminations Non Contolling Interest Consolidated Balance Dr. Cr. Current Assets $872,000 $262,400 $1,134,400 Investment in S Company $188,700 $188,700 Difference between Implied and Book Value (1) $69,267 (2) $69,267 Long-term Assets $1,394,700 $398,500 (2) $69,267 $1,862,467 Other Assets $89,800 $40,100 $129,900 Total Assets $2,545,200 $701,000 $3,126,767 Current Liabilities $639,000 $269,300 $908,300 Long-term Liabilities $857,300 $291,300 $1,148,600 Common Stock P Company $595,700 $595,700 S Company $180,600 $180,600 Retained Earnings P Company $453,200 $453,200 S Company ($40,200) $40,200 Noncontrolling Interest $20,967 $20,967 $20,967 Total Liabilities and Equity $2,545,200 $701,000 $319,134 $319,134 $3,126,767

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