Question
Matthews Co. obtained all of the common stock of Jackson Co. on January 1, 2020. As of that date, Jackson had the following trial balance:
Matthews Co. obtained all of the common stock of Jackson Co. on January 1, 2020. As of that date, Jackson had the following trial balance:
De bit Cred it
Accounts payable Accounts receivable Additional paid -in capital | $ 50,000 | $ 60,000 60,000 |
Buildings - net (20 - year life) | 140,000 |
|
Cash and short -term investments | 70,000 |
|
Common stock Equipment - net (8-year life) |
240,000 | 300,000
|
Inventory | 110,000 |
|
Land | 90,000 |
|
Long -term liabilities (mature 1/1/22) |
| 180,000 |
Retained earnings, 1/1/20 |
| 120,000 |
Supplies | 20,000 |
|
Totals | $ 720,000 | $ 720,000 |
During 2020, Jackson reported net income of $96,000 while paying dividends of $12,000. During 2021, Jackson reported net income of $132,000 while paying dividends of $36,000.
Assume that Matthews Co. acquired the common stock of Jackson Co. for $598,000 in cash. As of
January 1, 2020, Jackson's land had a fair value of $102,000, its buildings were valued at $188,000, and its equipment was appraised at $216,000. The Long-term liabilities represent bonds payable which had a fair value of $171,000. Any excess of consideration transferred over fair value of assets and liabilities acquired is due to an unamortized patent to be amortized over 10 years.
Matthews decided to use the initial value method for this investment.
Required:
Prepare consolidation worksheet entries for December 31, 2020
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