Question
On april 1,2016,Popol corportion purchased 80% of the outstanding stock of Sol company for 425,000. A condensed financial statement of financial position of Sol company
On april 1,2016,Popol corportion purchased 80% of the outstanding stock of Sol company for 425,000. A condensed financial statement of financial position of Sol company at the purchase date follows:
Assets;
current assets 180,000
Non current assets 320,000
Total assets 500,000
Liabilities and equity:
Liabilities 100,000
Common stock 200,000
APIC 100,000
Retained Earnings 100,000
Total liab and equity 500,000
All book values approximated fair values on the purchase date. Any excess costs is attributed to goodwill
The following data has been gathered pertaining to the first 2 years of operation since Popol corporations purchase of Sol company's stock
a. Intercompany sales of merchandise are summarized as follows:
Date:. April 1,2016 transaction: downstream,sales:35,000,gross profit: 15% merchandise remaining in purchaser inventory: 9,000
March 31,2017 transaction: upstream, sales: 20,000 gross profit: 20%. MERCHANDISE remaining in purchaser inventory: 3,500
Date: April 1,2017,TRANSACTION: DOWNSTREAM,SALES: 32,000 GROSS PROFIT RATE: 22,,% Merchandise remaining purchase r inventory 6,000..
March31,2018,,TRANSACTION:UPSTREAM,,SALES 30,000,,GROSS PROFIT RATE 25%, merchandise remaining purchase rs inventory: 3,000
B. On march 1,2018 Popol owed Sol 10,000 and Sol owned Popol 5,000 as a result if the intercompany sales
C. Popol paid 25,000 in cash dividends on march 20,2017 and 2018, Sol paid its first cash dividend on March 10,2018 ,giving each share of common stock at 0.15 cash dividend.
D. The trial balance if the two companies as of March 31,2018 as follows:
Account:
Cash
(popol corp)216,000
(Sol corp) 44300
Account receivable (popol) 290,000
(Sol) 97,000
Inventory:
( popol) 310,000
(Sol) 80,000
Investment in sol:
(Popol) 425,000
PPE:
(Popol) 1,991,000
(Sol) 340,000
Goodwill:
(Popol) 60,000
Accounts payable:
(Popol),(642,000)
(Sol), (106,300)
Common stock,0.15 par :
(Popol) 250,000
Common stock,1 par
(Sol) (200,000)
APIC:
(POPOL) (1250,000)
(SOL) ( 100,000)
Retained earnings April 1,2017:
(Popol) (1105,000)
(Sol) (140,000)
Sales:
Popol( 880,000)
(Sol) (630,000)
Dividend income:
(Popol) (24,000)
COGS:
(POPOL) 704,000
(SOL) 504,000
OTHER EXPENSE;
(POPOL) 130,000
(SOL) 81,000
DIVIDEND DECLARED:
(POPOL) 25,000
(SOL) 30,000
REQUIREMENTS:
1. PLEASE PREPARE THE JOURNAL ENTRIES ON THE DATE OF ACQUISITION. THEN MAKE THE DETERMINATION AND ALLOCATION IF EXCESS/GOODWILL SCHEDULE ON APRIL 1,2016, FURTHER, PROVIDE THE ELIMINATION ENTRIES IN MAKING THE CONSOLIDATED FINANCIAL STATEMENT AT THE DATE OF ACQUISITION.
2. PLEASE PREPARE THE ELIMINATION ENTRIES AND WORKING PAPER NECESSARY TO PRODUCE THE CONSOLIDATED STATEMENT S OF POPOL AND SOL FOR THE YEAR ENDED MARCH 31,2018
C. PLEASE PREPARE THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31,2018.
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