Question 11

1. Please use the following question to answer questions 14-20:

   On January 1, 2010, P Company purchased an 80% interest in S Company for $900,000. At that time, S Company had capital stock of $600,000 and retained earnings of $100,000. Differences between the fair value and the book value of the identifiable assets of Salem Company were as follows:

   		Fair Value in Excess of Book Value
   	Equipment	$ 180,000
   	Land	20,000
   	Inventory	20,000

   The book values of all other assets and liabilities of S Company were equal to their fair values on January 1, 2010. The equipment had a remaining life of five years. The inventory was sold in 2010.

   S Companys net income and dividends declared in 2010 Net Income of $120,000; Dividends Declared of $30,000

   14. Prepare JE at date of purchase

   15. Prepare W/P at date of purchase to eliminate the equity of S and investment of P (see above question)

2. 16. Prepare W/P to allocate the differences (see above question)

3. 17. Prepare J/E under cost method for NI and Dividends (see above question)

4. 17. Prepare J/E under cost method for NI and Dividends (see above question)

5. 19. Prepare W/P entry to eliminate the equity of S and investment of P at 12/31 (see above question)

6. 20. Prepare W/P to allocate differences (all inventory has been sold), and the extra depreciation entry (see above question)