Question
Mortar Corporation acquired 80 percent ownership of Granite Company on January 1, 20X7, for $173,000. At that date, the fair value of the noncontrolling interest
Mortar Corporation acquired 80 percent ownership of Granite Company on January 1, 20X7, for $173,000. At that date, the fair value of the noncontrolling interest was $43,250. On January 1, 2007, Granite's book value for Common Stock was $50,000 & Retained Earnings was $100,000.
Additional info:
On January 1, 20X7, Granite reported Buildings & Equipment with a book value of $150,000 and a fair value of $191,250. Granites depreciable assets had an estimated economic life of 11 years on the date of combination. Assume that any goodwill impairment should be recorded as an adjustment in Mortar's equity method accounts along with the differential components. Mortar uses the equity method in accounting for its investment in Granite.
1. Give all journal entries recorded by Mortar with regard to its investment in Granite on the date of the combination, January 1, 2007.
2. Give all eliminating entries needed to prepare a full set of consolidated financial statements immediately following the combination. Show Book value calculations & excess value (differential) calculations.
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