B326

Question 2 (25 marks) In January 1, 2017 Parent Company has acquired 75% of Subsidiary for $975,000. On the date of the acquisition the subsidiary had retained earnings $291,000 anda capital of $827,000. Separate balance sheets as of 1 January 2017 for Parent and its subsidiary are as follows: Description Parent Cash Receivable Land Property Investment in Subsidiary Total asset 22,500 30,000 390,000 750,000 975,000 2,167,500 Subsidiary at Book at fair value value 135,500 135,500 70,000 70,000 200,000 250,000 750.000 801,000 - 1,155,500 27,500 8,000 Account payable Other liabilities Capital stock Retained earnings Total equity and liabilities 12,500 62,500 1,900,000 192,500 2,167,500 30,000 7,500 8 27,000 291.000 1,155,500 Required: 1. Prepare the journal entry on parent's books to account for the investment in subsidiary (13 marks 2. Prepare the required elimination entries as of January 1, 2017. Show your computation for Excel fair value over book value and Goodwill. (17.5 marks) 3. Prepare a consolidated balance sheet for Parent and Subsidiary as of January 1, 2017. (6 marks ITED STATES