Part 1

On January 1, 2022, Poland Corporation bought 80% of the stock of Slovenia Corporation for $480,000. The Balance Sheets of the two companies immediately after the acquisition (January 1, 2022) of Slovenia Corp. showed the following amounts:

Poland Slovenia

Cash $ 130,000 $ 100,000

Accounts Receivable 120,000 30,000

Inventory 400,000 10,000

Land 500,000 100,000

Buildings & Equipment - Net 1,000,000 420,000

Trademarks 0 40,000

Investment in Slovenia 480,000 0

Total Assets 2,630,000 700,000

Accounts Payable $ 200,000 80,000

Long-Term Liabilities 1,080,000 20,000

Common Stock 1,000,000 400,000

Additional Paid in Capital - 50,000

Retained Earnings 350,000 150,000

Total Liabilities and

Stockholders' Equity $2,630,000 700,000

On the date of acquisition, the Book Value of Slovenia equaled its Fair Market Value (FMV). Poland uses the equity method to record its investment in Slovenia.

Required:

A. List all journal entries that Poland made to record its investment in Slovenia on the date of acquisition.

B. List all Elimination Entries that would need to be made in order to prepare a workpaper for the consolidated Balance Sheet of Poland and Slovenia immediately after the combination (January 1, 2022).

C. Prepare a workpaper for the consolidated Balance Sheet of Poland and Slovenia immediately after the combination (January 1, 2022). Show all necessary elimination entries in their proper columns. Use a letter coding system for each elimination entry. Use Figure 3-1 in text on page 107 for general format, and syllabus for additional formal requirements. MUST use a 6 column format as presented in Figure 3-1. Remember to do the format requirements in the syllabus, such as Dates, Company name (i.e. parent identified), Name of statement, Dollar Signs, Commas, and Underlines.

CHECK FIGURE:

Consolidated Assets = $2,850,000

NCI in Net Assets of Slovenia = $120,000