Question
Purchase Corporation purchased 60 percent of Steal Company ownership on January 1, 20X7, for $286,500. Steal reported the following net income and dividend payments: Year
Purchase Corporation purchased 60 percent of Steal Company ownership on January 1, 20X7, for $286,500. Steal reported the following net income and dividend payments:
Year | Net Income | Dividends Paid |
---|---|---|
20X7 | $ 49,000 | $ 29,000 |
20X8 | 59,000 | 39,000 |
20X9 | 34,000 | 14,000 |
On January 1, 20X7, Steal had $259,000 of $6 par value common stock outstanding and retained earnings of $159,000, and the fair value of the noncontrolling interest was $191,000. Steal held land with a book value of $25,500 and a market value of $33,000 and equipment with a book value of $336,000 and a market value of $376,000 at the date of combination. The remainder of the differential at acquisition was attributable to an increase in the value of patents, which had a remaining useful life of 10 years. All depreciable assets held by Steal at the date of acquisition had a remaining economic life of eight years.
Required:
- Compute the increase in the fair value of patents held by Steal.
- Prepare the consolidation entries needed at January 1, 20X7, to prepare a consolidated balance sheet.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
- Compute the balance reported by Purchase as its investment in Steal at December 31, 20X8.
- Prepare the journal entries recorded by Purchase with regard to its investment in Steal during 20X9.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
- Prepare the consolidation entries needed at December 31, 20X9, to prepare a three-part consolidation worksheet.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
Prev
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started