Question
This problem is a continuation of the problem in Section 11.5 of the chapter. In the chapter, the workpaper was prepared for the year of
This problem is a continuation of the problem in Section 11.5 of the chapter. In the chapter, the workpaper was prepared for the year of the acquisition. In this problem, the consolidated statements are prepared for the second year after acquisition. On January 1, 2019, P Company, a European basedcompany, purchased 80% of S Company for 200,000 (when the common stock account was 80,000, other contributed capital was 50,000, and retained earnings were 40,000). The trial balances at the end of 2020 are reported below. P Company acquired S Company because it wanted to expand its operations geographically. S Company is located in the United States and will be classified as a CGU. P Company elects to test for impairment on December 31 of each year. Because both P Company and S Company sell similar inventory, their inventory policies must conform for consolidation purposes. P Company uses average cost for inventories and S Company used FIFO. In addition, P Company uses the proportionate method to record noncontrolling interest and the cost method to record the investment in S Company. There were no goodwill impairment charges during the year.
- Prepare the computation and allocation of difference schedule for the date of acquisition.
- Prepare all worksheet eliminating entries needed for consolidation for 2020.
- Complete the consolidated workpaper for the year ended December 31, 2020.
- Show the computation of noncontrolling interest in equity at December 31, 2020.
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