Question
The Paris Company purchased an 80% interest in Seine, Inc. for $600,000 on July 1, 2015, when Seine had the following balance sheet: Assets Accounts
The Paris Company purchased an 80% interest in Seine, Inc. for $600,000 on July 1, 2015, when Seine had the following balance sheet:
Assets
Accounts receivable
$ 50,000
Inventory
120,000
Land
80,000
Building
270,000
Equipment
80,000
Total
$600,000
Liabilities and Equity
Current liabilities
$100,000
Common stock, $5 par
60,000
Paid-in capital in excess of par
140,000
Retained earnings (July 1)
300,000
Total
$600,000
The inventory is understated by $20,000 and is sold in the third quarter of 2015. The building has a fair value of $320,000 and a 10-year remaining life. The equipment has a fair value of $120,000 and a remaining life of 5 years. Any remaining excess is attributed to goodwill.
From July 1 through June 30, 2016, Seine had net income of $100,000 and paid $10,000 in dividends.
Assume that Paris uses the equity method to record its investment in Seine.
Required:
a.
Prepare determination and distribution of excess schedule as of July 1, 2015.
b.
Prepare the eliminations and adjustments that would be made on the June 30, 2016 consolidated worksheet to eliminate the investment in Seine. Distribute and amortize any excess.
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