On January 1, 2019, Perini Company purchased an 85% interest in Silvas Company for $400,000. On this
Question:
On January 1, 2019, Perini Company purchased an 85% interest in Silvas Company for $400,000. On this date, Silvas Company had common stock of $90,000 and retained earnings of $210,000. An examination of Silvas Company?s assets and liabilities revealed that their book value was equal to their fair value except for the equipment.
The equipment had an expected remaining life of six years and no salvage value. Straightline depreciation is used.
During 2019 and 2020, Perini Company reported net income from its own operations of $80,000 and paid dividends of $50,000 in each year. Silvas Company had income of $40,000 each year and paid dividends of $30,000 on each December 31.
Accumulated depreciation is presented on a separate row in the workpaper and in the consolidated financial statements.
Required:
A. Prepare eliminating entries for consolidated financial statements workpaper for the year ended December 31, 2019, assuming:
1. The cost method is used to account for the investment.
2. The partial equity method is used to account for the investment.
B. On January 1, 2019, Silvas Company sold all its equipment for $220,000. Prepare the eliminating entries for the consolidated financial statements workpaper for the year ended December 31, 2019, assuming:
1. The cost method is used to account for the investment.
2. The partial equity method is used to account for the investment.
Financial StatementsFinancial 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... Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
Step by Step Answer:
Computation and Allocation of Difference Schedule Parent Non Entire Share Controlling Value Share Purchase price and implied value 400000 70588 470588 Less Book value of equity acquired 255000 45000 3...View the full answer
