P9-6 Consolidation workpaper second year (conventional approach) Par Corporation acquired an 80 percent interest in Sip Corporation
Question:
P9-6 Consolidation workpaper second year (conventional approach)
Par Corporation acquired an 80 percent interest in Sip Corporation for $180,000 cash on January 1, 2016, when Sip had capital stock of $50,000 and retained earnings of $150,000. The excess of fair value over book value acquired is due to a patent, which is being amortized over five years. Sip purchased its 20 percent interest in Par at book value on January 2, 2016, for $100,000.
Financial statements for the year ended December 31, 2017, are summarized as follows:
Par Sip Combined Income and Retained Earnings Statement for the Year Ended December 31 Sales $140,000 $100,000 Income from Sip 28,000 —
Dividend income — 4,000 Gain on sale of land — 3,000 Expenses (80,000) (60,000)
Net income 88,000 47,000 Add: Beginning retained earnings 405,710 180,000 Deduct: Dividends (16,000) (20,000)
Retained earnings December 31 $477,710 $207,000 Balance Sheet at December 31 Other assets $448,000 $157,000 Investment in Sip (80%) 109,710 —
Investment in Par (20%) — 100,000 Total assets $557,710 $257,000 Capital stock $ 80,000 $ 50,000 Retained earnings 477,710 207,000 Total equities $557,710 $257,000 ADDITIONAL INFORMATION 1. Par’s separate earnings and dividends for 2017 were $60,000 and $20,000, respectively. Sip’s separate earnings and dividends in 2017 were $40,000 and $20,000, respectively.
2. Sip sold land to an outside interest for $7,000 on January 3, 2017, that it purchased from Par on January 3, 2016, for $4,000. The land had originally cost Par $2,000.
REQuIRED: Prepare consolidation workpaper entries and a consolidation workpaper for Par Corporation and Subsidiary at December 31, 2017, using the conventional approach for the mutual holding.
Step by Step Answer:
Advanced Accounting
ISBN: 9781292214597
13th Global Edition
Authors: Joseph H. Anthony, Bruce Bettinghaus, Floyd A. Beams, Kenneth Smith