Question
Based on Chapter 5, so NCI and a Differential is involved. Key pages are 184 through 191. Part 1 must use same general format style
Based on Chapter 5, so NCI and a Differential is involved. Key pages are 184 through 191. Part 1 must use same general format style as Figure 5-2 in text, and Part 2 must use same general format as Figure 5-4 in text. Remember additional formatting requirements in syllabus.
Part 1
On January 1, 20X4, Portsmouth Corp. bought 80% of the stock of Sandusky Corp. for $700,000. The Balance Sheets of the two companies immediately after acquisition (January 1, 20X4) of Sandusky Corp. showed the following:
Portsmouth Sandusky
Cash $ 130,000 $ 100,000
Accounts Receivable 120,000 130,000
Inventory 400,000 10,000
Land 500,000 100,000
Buildings & Equipment Net 1,000,000 320,000
Patent 0 40,000
Investment in Sandusky 700,000 0
Total Assets 2,850,000 700,000
Accounts Payable $ 320,000 60,000
Bonds Payable 1,180,000 40,000
Common Stock 1,000,000 400,000
Additional Paid in Capital 0 50,000
Retained Earnings 350,000 150,000
Total Liabilities and Stockholders' Equity $2,850,000 700,000
On the date of acquisition, the Book Value of Sandusky equaled its Fair Market Value (FMV), except for land that had a FMV of $140,000 and the copyrights with a FMV of $60,000. On the date of acquisition, the FMV of previously unrecorded identifiable intangibles (2-year life) of Sandusky was $40,000, and the Non-Controlling Interest (NCI)s fair value is $175,000. Portsmouth uses the equity method to record its investment in Sandusky.
Required:
A. List all journal entries Portsmouth makes to record its investment in Sandusky on the date of acquisition.
B. List all Consolidation/Elimination Entries needed in order to prepare a workpaper for the consolidated Balance Sheet of Portsmouth and Sandusky immediately after the combination (January 1, 2022).
C. Prepare a workpaper for the consolidated Balance Sheet of Portsmouth and Sandusky immediately after the combination (January 1, 2022). Show all necessary elimination entries in their proper columns (similar to Figure 5-2). Use a letter coding system for each elimination entry. Remember to do the format requirements in the syllabus, such as Dates, Company name (i.e., parent identified), Name of statement, Dollar Signs, Commas, and Underlines.
Check Figures:
Consolidated Assets = $3,125,000 NCI in Net Assets of Sandusky = $175,000
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started