34) On January 1, 2008, Orion Company acquired 70 percent of Simplex Company’s s
ID: 2579148 • Letter: 3
Question
34) On January 1, 2008, Orion Company acquired 70 percent of Simplex Company’s stock at underlying book value. At that date, the fair value of thenoncontrolling interest was equal to 30 percent of the book value of Simplex Company. On December 31, 2009, Simplex acquired 15 percent of Orion’s stock. Balance sheets for the two companies on December 31, 2009, are as follows:
Required:
Assuming that the treasury stock method is used in reporting Orion’s shares held by Simplex, prepare the elimination entries and a consolidated balance sheet worksheet for December 31, 2009.
Explanation / Answer
SOLUTION:
1) Dr. Common stock $100,000
Dr. Retained earnings $200,000
Cr. Investment in Simplex Company $210,000
Cr. NCI in NA of Simplex Company $90,000
2) Dr. Treasury stock $69,000
Cr. Investment in Orion Company $69,000
Working:
Orion Co.
Simplex Co.
Dr.
Cr.
Consolidated
Balance sheet
Cash
100,000
70,000
170,000
Account receivable
50,000
71,000
121,000
Inventory
100,000
80,000
180,000
Building and equipment
300,000
100,000
400,000
Investment in Simplex Company
210,000
210,000
0
Investment in Orion Company
69,000
69,000
0
Total assets
760,000
390,000
871,000
Accounts payable
50,000
40,000
90,000
Bonds payable
250,000
50,000
300,000
Common stock
200,000
100,000
100,000
200,000
Retained earning
260,000
200,000
200,000
260,000
Treasury stock
69,000
-69,000
NCI in NA of Simplex Co.
90,000
90,000
Total liabilities and equity
760,000
390,000
369,000
90,000
871,000
Orion Co.
Simplex Co.
Dr.
Cr.
Consolidated
Balance sheet
Cash
100,000
70,000
170,000
Account receivable
50,000
71,000
121,000
Inventory
100,000
80,000
180,000
Building and equipment
300,000
100,000
400,000
Investment in Simplex Company
210,000
210,000
0
Investment in Orion Company
69,000
69,000
0
Total assets
760,000
390,000
871,000
Accounts payable
50,000
40,000
90,000
Bonds payable
250,000
50,000
300,000
Common stock
200,000
100,000
100,000
200,000
Retained earning
260,000
200,000
200,000
260,000
Treasury stock
69,000
-69,000
NCI in NA of Simplex Co.
90,000
90,000
Total liabilities and equity
760,000
390,000
369,000
90,000
871,000
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