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Company A acquired 80% of Company B for $3.6M on 01/01/10. Also on that date, Company B had retained earnings of $800K and common stock
Company A acquired 80% of Company B for $3.6M on 01/01/10. Also on that date, Company B had retained earnings of $800K and common stock of $2.8M. The book value of assets and liabilities were equal to fair values with the exception of the following three assets: Inventory BV $50K FV $85K, Equipment (net) BV $540K FV $720K, Land BV $300K FV $660K. As of the acquisition date 01/01/19, the equipment listed above had a remaining useful life of eight years. Half of the inventory listed above was sold in 2019 and the other half was sold in 2020. Company B reported net income of $240K in 2019 and $300K in 2020. Company A uses the cost method to record its investment in Company B. Prepare all the workpaper eliminating entries for the year ending 12/31/2020. (Assume no dividends were declared or paid in 2019 and 2020)
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