Question
Palm Company acquired 100 percent of Storm Company?s voting stock on January 1, 2011, by issuing 10,000 shares of its $10 par value common stock
Palm Company acquired 100 percent of Storm Company?s voting stock on January 1, 2011,
by issuing 10,000 shares of its $10 par value common stock (having a fair value of $14 per share). As of that date, Storm had stockholders? equity totaling $105,000. Land shown on Storm?s accounting records was undervalued by $10,000. Equipment (with a 5-year remain- ing life) was undervalued by $5,000. A secret formula developed by Storm was appraised at $20,000 with an estimated life of 20 years.
Following are the separate financial statements for the two companies for the year end- ing December 31, 2015. There were no intra-entity payables on that date. Credit balances are indicated by parentheses. ***** Please see attachment for the statements
a.Explain how Palm derived the $66,000 balance in the Subsidiary Earnings account.
b.Prepare a worksheet to consolidate the financial information for these two companies.
** Please complete template attached. Thanks!
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