On January 2, 20X8, Photo Corporation acquired 75 percent of Shutter Company’s outstanding common stock. In exchange for Shutter’s stock, Photo issued bonds payable with a par value of $500,000 and fair value of $510,000 directly to the selling stockholders of Shutter. At that date, the fair value of the noncontrolling interest was $170,000. The two companies continued to operate as separate entities subsequent to the combination. Immediately prior to the combination, the book values and fair values of the companies’ assets and liabilities were as follows:

At the date of combination, Shutter owed Photo $6,000 plus accrued interest of $500 on a short-term note. Both companies have properly recorded these amounts.

Required

a. Record the business combination on the books of Photo Corporation.

b. Present in general journal form all consolidation entries needed in a worksheet to prepare a consolidated balance sheet immediately following the business combination on January 2, 20X8.

c. Prepare and complete a consolidated balance sheet worksheet as of January 2, 20X8, immediately following the business combination.

d. Present a consolidated balance sheet for Photo and for Shutter as of January 2, 20X8.

Transcribed Image Text:

Cash Receivables Allowance for Bad Debts Inventory Land Buildings & Equipment Accumulated Depreciation Patent Total Assets Current Payables Bonds Payable Common Stock Additional Paid-In Capital Retained Earnings Total Liabilities & Equity Photo Corporation Book Value $ 12,000 41,000 (2,000) 86,000 55,000 960,000 (411,000) $741,000 $ 38,000 200,000 300,000 100,000 103,000 $741,000 Fair Value $ 12,000 39,000 89,000 200,000 650,000 $990,000 $ 38,000 210,000 Shutter Company Book Value $9,000 31,000 (1,000) 68,000 50,000 670,000 (220.000) $607,000 $ 29,000 100,000 200,000 130,000 148,000 $607,000 Fair Value $ 9,000 30,000 72,000 70,000 500,000 40,000 $721,000 $ 29,000 100,000