Peanut Company acquired all of the common stock of Strong Company for $640,000 o
ID: 2711695 • Letter: P
Question
Peanut Company acquired all of the common stock of Strong Company for $640,000 on January 1, 2014. On that date, Strong Company had the following trial balance:
Debit credit
Additional paid-in capital 110,000
Building (20-year life) 250,000
Common stock 170,000
Current assets 120,000
Equipment (5 year life) 160,000
Land 130,000
Labilities (due in 5 year) 260,000
Reatain Earnings 1/1/14 120,000
Total $660,000 $660,000
During 2014, Strong Company reported net income of $40,000 and paid dividends of $20,000.
During 2015, Strong company reported net income of $108,000 and paid dividends of $60,000.
On January 1, 2014, Strong Company had a fair value of $165,000, its Building had a fair value of $330,000 and its Equipment had a fair value of $220,000. All other assets and liabilities had book values which approximated fair values.
There was no impairment in 2014 or 2015 of any goodwill arising from this acquisition.
Peanut Company uses the initial value method to account for its investment in Strong Company.
Prepare the consolidation worksheet entries for the worksheet prepared as of December 31, 2014.
Explanation / Answer
Peanut Company acquired all of the common stock of Strong Company for $640,000 o
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