On January 1, 2010, P Company purchased an 80% interest in S Company for $900,000. At that
Question:
On January 1, 2010, P Company purchased an 80% interest in S Company for $900,000. At that time, S Company had capital stock of $600,000 and retained earnings of $100,000. Differences between the fair value and the book value of the identifiable assets of Salem Company were as follows:
Fair Value in Excess of Book Value
Equipment
$ 180,000
Land
20,000
Inventory
20,000
The book values of all other assets and liabilities of S Company were equal to their fair values on January 1, 2010. The equipment had a remaining life of five years. The inventory was sold in 2010.
S Company’s net income and dividends declared in 2010 Net Income of $120,000; Dividends Declared of $30,000
Requirement
Prepare W/P at the date of purchase to eliminate the equity of S and investment of P (see above question)
Federal Taxation 2016 Comprehensive
ISBN: 9780134104379
29th edition
Authors: Thomas R. Pope, Timothy J. Rupert, Kenneth E. Anderson