On December 31, 20X8, Defoe Corporation acquired 80 percent of Crusoe Company\'s

Question

On December 31, 20X8, Defoe Corporation acquired 80 percent of Crusoe Company's common stock for $104,000 cash. The fair value of the noncontrolling interest at that date was determined to be $26,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition:

On that date, the book values of Crusoe's assets and liabilities approximated fair value except for inventory, which had a fair value of $45,000, and buildings and equipment, which had a fair value of $100,000. At December 31, 20X8, Defoe reported accounts payable of $15,000 to Crusoe, which reported an equal amount in its accounts receivable.
Required:
1) Provide the eliminating entries needed to prepare a consolidated balance sheet immediately following the business combination.

Explanation / Answer

Defore reported accounts payable of $15,000 crusoe and accounts receivable is consisted of that amount. So in the books of Defore, we need to record below journal entry while preparing consolidated balance sheet.

Accounts Payable Debit $15,000

Accounts Receivable Credit 15,000

(Adjustments of receivable / payable on consolidation)

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