Question
Masterson Company acquires a 80% interest in its subsidiary for a purchase price of $620,800. The excess of the purchase price over the book value
Masterson Company acquires a 80% interest in its subsidiary for a purchase price of $620,800. The excess of the purchase price over the book value of the subsidiarys Stockholders Equity is allocated to a building (in PPE, net) that the parent believes is worth $50,000 more than its book value, an unrecorded Patent that the parent valued at $100,000, and Goodwill of $150,000, 80% of which is allocated to the parent.
The parent and the subsidiary report the following balance sheets on the acquisition date:
| Masterson | Subsidiary |
|
| Masterson | Subsidiary |
|
|
|
|
|
|
|
Cash | $ 920,753 | $107,576 |
| Current Liabilities | $ 814,779 | $165,648 |
Accounts receivable | 725,760 | 165,648 |
| Long-term Liabilities | 3,379,200 | 238,000 |
Inventory | 1,099,980 | 212,772 |
| Common Stock | 927,045 | 47,600 |
Equity Investment | 620,800 |
|
| APIC | 688,905 | 59,500 |
PPE, net | 5,291,244 | 393,652 |
| Retained Earnings | 2,848,608 | 368,900 |
| $8,658,537 | $879,648 |
|
| $8,658,537 | $879,648 |
Prepare the consolidation journal entries on the acquisition date.
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