On January 1, 20X1, Elm Corporation paid Morton Advertising ($ 122,000) to acquire 70 percent of the
Question:
On January 1, 20X1, Elm Corporation paid Morton Advertising \(\$ 122,000\) to acquire 70 percent of the stock of Vincent Company. Elm Corporation also paid \(\$ 45,000\) to acquire \(\$ 50,000\) par value 8 percent 10 -year bonds directly from Vincent Company on that date. Interest payments are made on January 1 and July 1. The purchase price of the stock was \(\$ 45,000\) above book value and resulted from an increase in the value of depreciable assets held by Vincent. The assets had an estimated remaining economic life of 15 years on January 1, 20X1.
The trial balances for the two companies as of December 31, 20X3, are as follows:
On July 1, 20X2, Vincent Company sold land which it had purchased for \(\$ 17,000\) to Elm Corporation for \(\$ 25,000\). Elm continues to hold the land at December 31, 20X3.
\section*{Required}
a. Record the journal entries for \(20 \times 3\) on the books of Elm Corporation related to its investment in Vincent Company's stock and bonds.
b. Record the entries for \(20 \times 3\) on the books of Vincent Company related to its bond issue.
c. Prepare elimination entries needed to complete a consolidation workpaper for 20X3.
d. Prepare a three-part consolidation workpaper for 20X3.
Step by Step Answer:
Advanced Financial Accounting
ISBN: 9780072444124
5th Edition
Authors: Richard E. Baker, Valdean C. Lembke, Thomas E. King