EXERCISE 3-6

Prepare the elimination entry required for the preparation of a consolidated balance sheet workpa- per on December 31, 2019, assuming:

(1) The purchase price of the stock was $1,400,000. Assume that any difference between the book value of net assets and the value implied by the purchase price relates to subsidiary land.

(2) The purchase price of the stock was $1,160,000. Assume that the subsidiary land has a fair value of $180,000, and the other assets and liabilities are fairly valued.

Elimination Entry, Consolidated Balance Sheet LO 8

On December 31, 2018, Price Company purchased a controlling interest in Shipley Company. The balance sheet of Price Company and the consolidated balance sheet on December 3, 2018, were as follows:

Required:

Exercises

113

Price Company

Consolidated

$ 37,900 57,000 161,600 0 337,000 220,412

$813,912

$112,500 100,000 37,412 300,000 164,000 100,000

$813,912

Cash Accounts receivable Inventory 127,000 Investment in Shipley Company 212,000 Plant and equipment (net) 190,000 Land 120,000

$ 22,000 35,000

Total

Accounts payable Note payable Noncontrolling interest in Shipley Company Common stock Other contributed capital Retained earnings

Total

$706,000

$ 42,000 100,000 0 300,000 164,000 100,000

$706,000

On the date of acquisition, the stockholders equity section of Shipley Companys balance sheet was as follows:

Common stock Other contributed capital Retained earnings

Total

Required:

$ 90,000 90,000 56,000 $236,000

EXERCISE 3-7

A. Prepare the investment elimination entry made to complete a consolidated balance sheet workpaper. Any difference between book value and the value implied by the purchase price relates to subsidiary land.

B. Prepare Shipley Companys balance sheet as it appeared on December 31, 2018.