A 90% interest in Saxton Corporation was purchased by Palm Incorporated on January 2, 2019. The capital
Question:
A 90% interest in Saxton Corporation was purchased by Palm Incorporated on January 2, 2019. The capital stock balance of Saxton Corporation was $3,000,000 on this date, and the balance in retained earnings was $1,000,000. The cost of the investment to Palm Incorporated was $3,750,000.
The balance sheet information available for Saxton Corporation on the acquisition date revealed these values:
The equipment was determined to have a 15-year useful life when purchased at the beginning of 2009. Saxton Corporation reported net income in 2019 of $250,000 and $300,000 in 2020. No dividends were declared in either of those years.
Required:
A. Prepare the worksheet entries, assuming that the complete equity method is used to account for the investment, to eliminate the investment account, and to allocate and depreciate the difference between book value and the value implied by the purchase price in the 2020 consolidated statements workpaper.
B. Calculate the consolidated retained earnings for the year ended December 31, 2020, assuming that the balance in Palm Incorporated?s ending retained earnings on that date was $2,705,000.
Balance SheetBalance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... 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...
Step by Step Answer:
Part A Computation and Allocation of Difference Schedule Parent Non Entire Share Controlling Value Share Purchase price and implied value 3750000 4166...View the full answer
