On January 1, 2012, Perez Company purchased 90% of the capital stock of Sanchez Company for $85,000.
Question:
On January 1, 2012, Perez Company purchased 90% of the capital stock of Sanchez Company for $85,000. Sanchez Company had capital stock of $70,000 and retained earnings of $12,000 at that time. On December 31, 2016, the trial balances of the two companies were:
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Any difference between book value and the value implied by the purchase price relates to goodwill.
Required:
A. What method is being used by Perez to account for its investment in Sanchez Company? How can you tell?
B. Prepare a work-paper for the preparation of consolidated financial statements on 12/31/16?
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Step by Step Answer:
Part A Perez Company uses the cost method If the cost method is used Perez Company recognizes dividends received as income Part B Perez Company and Su...View the full answer
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