Question
Pop Corporation acquired 70 percent of Soda Company's voting common shares on January 1, 20X2, for $114,800. At that date, the noncontrolling interest had a
Pop Corporation acquired 70 percent of Soda Company's voting common shares on January 1, 20X2, for $114,800. At that date, the noncontrolling interest had a fair value of $49,200 and Soda reported $70,000 of common stock outstanding and retained earnings of $25,000. The differential is assigned to buildings and equipment, which had a fair value $22,000 higher than book value and a remaining 10-year life, and to patents, which had a fair value $47,000 higher than book value and a remaining life of five years at the date of the business combination. Trial balances for the companies as of December 31, 20X3, are as follows:
On December 31, 20X2, Soda purchased inventory for $30,000 and sold it to Pop for $50,000. Pop resold $29,000 of the inventory (i.e., $29,000 of the $50,000 acquired from Soda) during 20X3 and had the remaining balance in inventory at December 31, 20X3. During 20X3, Soda sold inventory purchased for $54,000 to Pop for $90,000, and Pop resold all but $26,000 of its purchase. On March 10, 20X3, Pop sold inventory purchased for $16,000 to Soda for $32,000. Soda sold all but $8,000 of the inventory prior to December 31, 20X3. Assume Pop uses the fully adjusted equity method, that both companies use straight-line depreciation, and that no property, plant, and equipment has been purchased since the acquisition. Required: a. Prepare all consolidation entries needed to prepare a full set of consolidated financial statements at December 31, 20X3, for Pop and Soda. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Pop Corporation | Soda Company | |||||||||||||||
Item | Debit | Credit | Debit | Credit | ||||||||||||
Cash & Accounts Receivable | $ | 17,400 | $ | 23,600 | ||||||||||||
Inventory | 167,000 | 37,000 | ||||||||||||||
Land | 82,000 | 42,000 | ||||||||||||||
Buildings & Equipment | 360,000 | 262,000 | ||||||||||||||
Investment in Soda Company | 117,100 | |||||||||||||||
Cost of Goods Sold | 188,000 | 81,800 | ||||||||||||||
Depreciation Expense | 25,000 | 20,000 | ||||||||||||||
Interest Expense | 18,000 | 7,200 | ||||||||||||||
Dividends Declared | 32,000 | 17,000 | ||||||||||||||
Accumulated Depreciation | $ | 142,000 | $ | 90,000 | ||||||||||||
Accounts Payable | 94,400 | 37,000 | ||||||||||||||
Bonds Payable | 234,180 | 90,000 | ||||||||||||||
Bond Premium | 1,600 | |||||||||||||||
Common Stock | 122,000 | 70,000 | ||||||||||||||
Retained Earnings | 129,900 | 62,000 | ||||||||||||||
Sales | 262,000 | 140,000 | ||||||||||||||
Other Income | 11,600 | |||||||||||||||
Income from Soda Company | 10,420 | |||||||||||||||
$ | 1,006,500 | $ | 1,006,500 | $ | 490,600 | $ | 490,600 |
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