Question 8

On January 1, 2019, P Co. acquired 80 percent of S Co. for $400,000 cash. S reported net income of $20,000 and dividends of $3,000 for 2019.On the date of acquisition, S reported common stock outstanding of $350,000 and retained earnings of $50,000.It held land with a book value of $180,000 and a market value of $200,000, and equipment with a book value of $80,000 and a market value of $98,000 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 ten years.All depreciable assets held by S at the date of acquisition had a remaining economic life of eight years.P uses the equity method in accounting for its investment in S.

a) Provide the journal entries recorded by P during 2019 on its books if it accounts for its investment in S

b) Provide all consolidation entries needed at December 31, 2019, to prepare consolidated financial statements.