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On January 1, 2017, Plutonium Corporation acquired 80% of the outstanding stock of Sulfurst Inc. for $287,900 cash. The following balance sheet shows Sulfurst Inc.s
On January 1, 2017, Plutonium Corporation acquired 80% of the outstanding stock of Sulfurst Inc. for $287,900 cash. The following balance sheet shows Sulfurst Inc.s book values immediately prior to acquisition, as well as the appraised values of its assets and liabilities by Plutoniums experts.
Sulfurst Inc.s Book Values | Sulfurst Inc.s Market Values | |||
Current assets | $87,800 | $87,800 | ||
Property, plant & equipment: | ||||
Land | 81,500 | 102,400 | ||
Building & machinery (net) | 169,200 | 169,200 | ||
Total assets | $338,500 | |||
Total liabilities | $95,000 | $95,000 | ||
Common stock, $5 par value | 93,800 | |||
Additional paid-in-capital | 20,500 | |||
Retained earnings | 129,200 | |||
Total liabilities and equities | $338,500 |
Prepare the entry to be made on the books of Plutonium Corporation to record its investment in Sulfurst Inc. Assume that during the first two years after acquisition of Sulfurst Inc., Sulfurst reports the following changes in its retained earnings:
Retained earnings, January 1, 2017 | $129,200 | ||
Net income, 2017 | 41,200 | ||
Less: dividends, 2017 | (24,000 | ) | |
Net income, 2018 | 44,300 | ||
Less: dividends, 2018 | (23,400 | ) | |
Retained earnings, December 31, 2018 | $167,300 |
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