Question Two

Jazzy Company acquired 80% of Fady Companys outstanding common stock for $270,000 on January 1, 2020, and fair value of non-controlling interest is estimated by $67,500. While the book value of net assets is $300,000 (CS: $200,000 and RE: $100,000). Differences is attributed as following:

Land $10,000

Equipment $15,000 with remaining useful life of 5 years

Remining balance is attributed to goodwill, it is impaired during 2020 by $2,000

Jazzy uses the equity method to account for investments. At end of 2020 Fady reported net income $100,000 and paid $20,000 dividends. The following trial balance summarizes the financial position and operations for Jazzy and Fady as of December 31, 2021:

Required:

1. Prepare required entries in Jazzy Company at end of 2020 using fully adjusted equity method.

2. Prepare the elimination entries at end of 2020.

3. Complete the consolidated worksheet shown below at Dec.31,2020.