Refer to the information in P5-30 on pp. 228 of your textbook.

Assume Photo Corporation purchased 86 percent of the outstanding stock of Shutter Company (i.e., replace 75 percent with 86 percent in first line of problem).

Also assume that Photo Corporation paid $678,540 to Shutter Company instead of issuing bonds and the fair value of noncontrolling interest on the date of acquisition is $110,460 (make sure you understand how that amount was calculated). When amortizing the differential related to depreciable assets, the useful life of Buildings and Equipment and Patent on the date of acquisition are 12 years and 6 years, respectively.

During 20X8, Shutter Company (1) reported net income of $550,000, (2) paid dividends of $175,000, and (3) determined that there was an impairment of goodwill of $57,000 during 20x8. Photo also owed Shutter Corporation $22,250 on account on December 31, 20X8. In your entries, make sure you use the same account titles as the company uses.

(a) Journalize the entries for the equity method on the books of Photo Corporation during 2008.

(b) Journalize the elimination entries that would be prepared by Photo Corporation to consolidate its financial statements on December 31, 20X8.

Problem Extension (ungraded): during 20X9, Shutter reported a net loss of $150,000, did not pay dividends, had no impairment of goodwill, and there were no intercompany payable/receivable transactions on December 31, 20X9. Record the equity method and elimination entries for 20X9.

apter 5 Consolidation of Less than wholly-Owned Subsidiaries Acquired at More than Book Value P5-30 Required a. Give the consolidation entry or entries needed to prepare a consolidated balance shee immediately following the business combination. b. Prepare a consolidated balance sheet worksheet. c. Prepare a consolidated balance sheet in good form. Balance Sheet Consolidation of Majority-Owned Subsidiary On January 2, 20X8, Photo Corporation acquired 75 percent of Shutter Company's outstand, ing common stock. In exchange for Shutter's stock, Photo issued bonds payable with a par valle of $500,000 and fair value of $510,000 directly to the selling stockholders of Shutter. At that date the fair value of the noncontrolling interest was $170,000. The two companies continued to operate as separate entities subsequent to the combination Immediately prior to the combination, the book values and fair values of the companies' assets and liabilities were as follows: Shutter Company Book Value Fair Value $ 9,000 30,000 Cash Receivables Allowance for Bad Debts Inventory Land Buildings & Equipment Accumulated Depreciation Patent Photo Corporation Book Value Fair Value $ 12,000 $ 12,000 41,000 39,000 12.000) 86,000 89,000 55,000 200,000 960,000 650,000 (411,000) $ 9,000 31.000 (1,000) 68,000 50.000 670,000 (220.000) 72.000 70,000 500,000 40,000 $990,000 $ 38,000 210.000 Total Assets Current Payables Bonds Payable Common Stock Additional Paid-In Capital Retained Earnings Total Liabilities & Equity $741.000 $ 38,000 200.000 300,000 100,000 103.000 $741.000 $607.000 $ 29,000 100,000 200,000 130,000 148.000 $721,000 $ 29,000 100,000 $607,000 At the date of combination, Shutter owed Photo $6,000 plus accrued interest of $500 on a short-term note. Both companies have properly recorded these amounts. Required a. Record the business combination on the books of Photo Corporation. b. Present in general journal form all consolidation entries needed in a worksheet to prepa solidated balance sheet immediately following the business combination on January 2, 20X8. c. Prepare and complete a consolidated balance sheet worksheet as of January 2, 20X8, immedi- ately following the business combination. d. Present a consolidated balance sheet for Photo and for Shutter as of January 2, 20X8. P5-31 Incomplete Data Paragraph Corporation acquired controlling ownership of Sentence Corporation on December 31, 20X3, and a consolidated balance sheet was neared immodinul a con- apter 5 Consolidation of Less than wholly-Owned Subsidiaries Acquired at More than Book Value P5-30 Required a. Give the consolidation entry or entries needed to prepare a consolidated balance shee immediately following the business combination. b. Prepare a consolidated balance sheet worksheet. c. Prepare a consolidated balance sheet in good form. Balance Sheet Consolidation of Majority-Owned Subsidiary On January 2, 20X8, Photo Corporation acquired 75 percent of Shutter Company's outstand, ing common stock. In exchange for Shutter's stock, Photo issued bonds payable with a par valle of $500,000 and fair value of $510,000 directly to the selling stockholders of Shutter. At that date the fair value of the noncontrolling interest was $170,000. The two companies continued to operate as separate entities subsequent to the combination Immediately prior to the combination, the book values and fair values of the companies' assets and liabilities were as follows: Shutter Company Book Value Fair Value $ 9,000 30,000 Cash Receivables Allowance for Bad Debts Inventory Land Buildings & Equipment Accumulated Depreciation Patent Photo Corporation Book Value Fair Value $ 12,000 $ 12,000 41,000 39,000 12.000) 86,000 89,000 55,000 200,000 960,000 650,000 (411,000) $ 9,000 31.000 (1,000) 68,000 50.000 670,000 (220.000) 72.000 70,000 500,000 40,000 $990,000 $ 38,000 210.000 Total Assets Current Payables Bonds Payable Common Stock Additional Paid-In Capital Retained Earnings Total Liabilities & Equity $741.000 $ 38,000 200.000 300,000 100,000 103.000 $741.000 $607.000 $ 29,000 100,000 200,000 130,000 148.000 $721,000 $ 29,000 100,000 $607,000 At the date of combination, Shutter owed Photo $6,000 plus accrued interest of $500 on a short-term note. Both companies have properly recorded these amounts. Required a. Record the business combination on the books of Photo Corporation. b. Present in general journal form all consolidation entries needed in a worksheet to prepa solidated balance sheet immediately following the business combination on January 2, 20X8. c. Prepare and complete a consolidated balance sheet worksheet as of January 2, 20X8, immedi- ately following the business combination. d. Present a consolidated balance sheet for Photo and for Shutter as of January 2, 20X8. P5-31 Incomplete Data Paragraph Corporation acquired controlling ownership of Sentence Corporation on December 31, 20X3, and a consolidated balance sheet was neared immodinul a con