Question
Picky Corporation paid $350,000 for an 70% interest in Sticky Corporation on January 1, 20X6 when the stockholders' equity of Sticky consisted of $200,000 capital
Picky Corporation paid $350,000 for an 70% interest in Sticky Corporation on January 1, 20X6 when the stockholders' equity of Sticky consisted of $200,000 capital stock and $140,000 retained earnings. The following assets of Sticky had fair values different from their book values when Picky acquired its interest:
Stickys accounts payable at December 31, 20X8 included $15,000 owed to Picky. Picky and Stickys financial statements for the year ended 12/31/20X8 are provided below:
Prepare all necessary journal entries in the consolidated workpapers at 12/31/X8. Hint - there are 9.
1. Eliminate Income from Sub
2. Create NCI share
3. Eliminate BOY balances
4. Assign 1/1/X8 unamortized differences
5 & 6. Record amortizations
7 9. Eliminate intercompany transactions
Inventories (sold in 20X6) Equipment (5-year life at the time of combination) Bonds Payable (matures on Dec 31, 20X9) Book Value $ 50,000 600,000 (500,000) Fair Value $ 32,000 680,000 (532,000) Picky (In 000's) Sticky (In 000's) $300.0 Income Statement Sales Income from Sticky Cost of sales Operating expenses Interest expense Net Income $882.0 29.4 (600.0) (150.0) (30.0) (150.0) (75.0) (25.0) $131.4 $50.0 $160.0 50.0 $105.0 131.4 (100.0) $136.4 (20.0) $190.0 Retained Earnings Retained earnings 1/1/X8 Net income Dividends Retained earnings-12/31/X8 Balance Sheet Cash Accounts receivable Inventories Loan receivable from Sticky Land Equipment-net Dividends receivable Investment in Sticky Totals $15.0 20.0 60.0 $166.6 72.0 100.0 50.0 160.0 240.0 7.0 85.0 730.0 380.8 $1,176.4 $910.0 $100.0 70.0 170.0 Accounts payable Dividends payable Bonds payable Loan payable to Picky Capital stock Retained earnings Totals $60.0 10.0 400.0 50.0 200.0 190.0 $910.0 700.0 136.4 $1,176.4
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