Perke Corporation purchased 80% of the stock of Superstition Company for $1,970,000 on January 1, 2020. On

Question:

Perke Corporation purchased 80% of the stock of Superstition Company for $1,970,000 on January 1, 2020. On this date, the fair value of the assets and liabilities of Superstition Company was equal to their book value except for the inventory and equipment accounts. The inventory had a fair value of $725,000 and a book value of $600,000. Sixty percent of Superstition Company?s inventory was sold in 2020; the remainder was sold in 2021. The equipment had a book value of $900,000 and a fair value of $1,075,000. The remaining useful life of the equipment is seven years.

The balances in Superstition Company?s capital stock and retained earnings accounts on the date of acquisition were $1,200,000 and $600,000, respectively. Perke uses the complete equity method to account for its investment in Superstition. The following financial data are from Superstition Company?s records.

image

Required:

A. In general journal form, prepare the entries on Perke Company?s books to account for its investment in Superstition Company for 2020 and 2021.

B. Prepare the eliminating entries necessary for the consolidated statements workpapers in 2020 and 2021.

C. Assuming Perke Corporation?s net income for 2020 was $1,000,000, calculate the controlling interest in consolidated net income for 2021.

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Advanced Accounting

ISBN: 978-1119373209

7th edition

Authors: Debra C. Jeter, Paul K. Chaney

Question Posted: