Question
Putt Corporation acquired 70 percent of Slice Companys voting common stock on January 1, 20X3, for $158,900. Slice reported common stock outstanding of $100,000 and
Putt Corporation acquired 70 percent of Slice Companys voting common stock on January 1, 20X3, for $158,900. Slice reported common stock outstanding of $100,000 and retained earnigs of $85,000. The fair value of the noncontrolling interest was $68,100 at the date of acquisition. Buildings and equipment held by Slice had a fair value $25,000 higher than book value. The remainder of the differential was assigned to a copyright held by Slice. Buildings and equipment had a 10-year remaining life and the copyright had a 5-year life at the date of acquisition. Trial balances for Putt and Slice on December 31, 20X5, are as follows:
Putt Corporation | Slice Company | ||||||||||||||||||
Debit | Credit | Debit | Credit | ||||||||||||||||
Cash | $ | 15,850 | $ | 58,000 | |||||||||||||||
Accounts Receivable | 65,000 | 70,000 | |||||||||||||||||
Interest & Other Receivables | 30,000 | 10,000 | |||||||||||||||||
Inventory | 150,000 | 180,000 | |||||||||||||||||
Land | 80,000 | 60,000 | |||||||||||||||||
Buildings & Equipment | 315,000 | 240,000 | |||||||||||||||||
Bond Discount | 15,000 | ||||||||||||||||||
Investment in Slice Company | 157,630 | ||||||||||||||||||
Cost of Goods Sold | 375,000 | 110,000 | |||||||||||||||||
Depreciation Expense | 25,000 | 10,000 | |||||||||||||||||
Interest Expense | 24,000 | 33,000 | |||||||||||||||||
Other Expense | 28,000 | 17,000 | |||||||||||||||||
Dividends Declared | 30,000 | 5,000 | |||||||||||||||||
Accumulated | |||||||||||||||||||
DepreciationBuildings and Equipment | $ | 120,000 | $ | 60,000 | |||||||||||||||
Accounts Payable | 61,000 | 28,000 | |||||||||||||||||
Other Payables | 30,000 | 20,000 | |||||||||||||||||
Bonds Payable | 250,000 | 300,000 | |||||||||||||||||
Common Stock | 150,000 | 100,000 | |||||||||||||||||
Additional Paid-in Capital | 30,000 | ||||||||||||||||||
Retained Earnings | 165,240 | 100,000 | |||||||||||||||||
Sales | 450,000 | 190,400 | |||||||||||||||||
Other Income | 28,250 | ||||||||||||||||||
Gain on Sale of Equipment | 9,600 | ||||||||||||||||||
Income from Slice Company | 10,990 | ||||||||||||||||||
Total | $ | 1,295,480 | $ | 1,295,480 | $ | 808,000 | $ | 808,000 | |||||||||||
Putt sold land it had purchased for $21,000 to Slice on September 20, 20X4, for $32,000. Slice plans to use the land for future plant expansion. On January 1, 20X5, Slice sold equipment to Putt for $91,600. Slice purchased the equipment on January 1, 20X3, for $100,000 and depreciated it on a 10-year basis, including an estimated residual value of $10,000. The residual value and estimated economic life of the equipment remained unchanged as a result of the transfer, and both companies use straight-line depreciation. Assume Putt uses the fully adjusted equity method. Required:
Prepare a reconciliation between the balance in the Investment in Slice Company account reported by Putt at December 31, 20X5, and the underlying book value of net assets reported by Slice at that date. (Enter the proportion of stock held as a fraction (i.e., 0.75), not in percent.)
Underlying book value of Slice Company stock: Common stock outstanding Retained earnings, January 1, 20X5 Net income for 20X5 Dividends paid in 20X5 Net book value Portion of ownership held by Putt Net book value of ownership held by Putt Unamortized differential: Buildings and equipment Copyright Gain on sale of land Deferred gross profit on sale of equipment Realized deferred gain Investment in Slice Company Underlying book value of Slice Company stock: Common stock outstanding Retained earnings, January 1, 20X5 Net income for 20X5 Dividends paid in 20X5 Net book value Portion of ownership held by Putt Net book value of ownership held by Putt Unamortized differential: Buildings and equipment Copyright Gain on sale of land Deferred gross profit on sale of equipment Realized deferred gain Investment in Slice Company
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