Question
Pop Corporation acquired 100 percent of Sun Corporation's outstanding voting common stock on Jan. 1 2016 for $660,000 cash. Sun's stockholder's equity on this date
Pop Corporation acquired 100 percent of Sun Corporation's outstanding voting common stock on Jan. 1 2016 for $660,000 cash. Sun's stockholder's equity on this date consisted of $300,000 capital stock and $300,000 retained earnings. The difference between the price paid by Pop and the Underlying equity acquired in Sun was allocated $30,000 to Sun's undervalued inventory and the remainder to patents with a 5 year write-off period. The undervalued inventory items were sold by Sun during 2016.
Pop made sales of $100,000 to Sun at a gross profit of $40,000 during 2016; during 2017, Pop made sales of $120,000 to Sun at a gross profit of $48,000. One half of the 2016 sales were inventoried by Sun at year-end 2016, and one fourth the 2017 sales were inventoried by Sun at year end 2017. Sun owned Pop $17,000 on account at Dec. 31, 2017.
The separate financial statements of Pop and Sun Corporations at end of year ended Dec 31, 2017 are summarized below in thousands:
Pop Sun
Sales 800 400
Income from sun 102 ----
Cost of sales (400) (200)
Depreciation expense (110) (40)
Other expenses (192) (60)
Net income 200 100
Beginning retained earnings 600 380
Less: Dividends (100) (50)
Retained earnings Dec 31, 2017 700 430
Cash 54 37
Receivables-net 90 60
Inventories 100 80
Other assets 70 90
Land 50 50
Buildings-net 200 150
Equipment-net 500 400
Investment in Sun 736 -----
Total Assets 1800 867
Accounts Payable 160 47
Other liabilities 340 90
Common Stock $10 par 600 300
Retained earnings 700 430
Total equities 1800 867
Prepare Consolidated Worksheet with adjustments for year end Dec 31, 2017 For POP
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