Palm Corporation purchased 80 percent of Star Corporation’s stock on January 1, 2020. At that date,
Star reported retained earnings of $80,000 and had $120,000 of stock outstanding. The fair value of its
buildings was $32,000 more than the book value. Palm paid $190,000 to acquire the Star shares. At that
date, the non-controlling interest had a fair value of $47,500. The remaining economic life for all Star’s
depreciable assets was eight years on the date of combination. The amount of the differential assigned
to goodwill is not impaired. Star reported net income of $40,000 in 2020 and declared no dividends.
Required
a. Give the elimination entries needed to prepare a consolidated balance sheet immediately after Palm
purchased Star stock.
b. Give all elimination entries needed to prepare a full set of consolidated financial statements for
2020.