UNIT 4 POST PROBLEM 1 On December 31, 200XP Corporation paid $300,000 cash for 80% of the common stock of s Company which becomes a subsidiary. Following information is shown prior to the acquisition being recorded: P Company Liabilities and Equity Liabilities 90,000 Assets Cash Inventories Plant 580,000 60,000 340,000 Common Stock, $5pv Paid in Capital Retained Earnings Total 100,000 200,000 590,000 980,000 Total 980,000 Assets Inventories Other assets Plant 20,000 40,000 140,000 S Company Liabilities and Equity Liabilities Long Term Debt Common Stock, $10pv Paid in Capital Retained Earnings Total 30,000 50,000 40,000 20,000 60,000 200,000 Total 200,000 S market values are: Plant Inventory $250,000 $50,000 1. Prepare the entries in journal format to record the acquisition and post to the general edger accounts. 2. Prepare a consolidation workpaper. 3. Prepare consolidated balance sheet. Entry to record the purchase of S Company: Investment in S Company Cash Entry in the P Corporation General Ledger to record the purchase of 80% of S Company. Cash 580,000 Investment in S Co. ENTRIES ON CONSOLIDATION WORKSHEET Consolidation Entry S: Common Stock Paid in Capital Retained Earnings (Beginning) Investment in S Company Noncontrolling interest Eliminate subsidiary equity Consolidation Entry A: Plant Inventory Goodwill Investment in S Company Noncontrolling interest Allocate subsidiary acquisition date fair value adjustments Compuation of Goodwill s Company Net Assets at Book Value Inventory Other Assets Plant Liabilities Long Term Debt Net Assets at Book Net Assets at Market S Company acquisition date fair value S Company acquisition date book value Fair value in excess of book value Fair value adjustments to: Plant Inventory Amount allocated to goodwill 115,000 Paid $300,000 for 80% Noncontrolling interest 20% Acquisition date fair value Fair Market Value Goodwill Goodwill Allocation to Controlling and Noncontrolling Interest Total Controlling Noncontrolling Fair value at acquisition date Relative fair value of S Company net assets (80% and 20%) Goodwill 115,000 115,000 Controlling interest - 80% Noncontrolling interest - 20% Goodwill Noncontrolling Interest 20% of 260,000 + 23,000 goodwill = 115,000 75,000 P CORPORATION AND S CO. Working Paper for Consolidated Balance Sheet 12/31/200x P S Corporation Company Debit Credit Consolidated Assets Cash Inventories Other Assets Investment in S Plant Goodwill Total Assets 115,000 Liabilities & Equity Current Liabilities Long Term Debt Noncontrolling Interest 75,000 Common Stock $5 par Common Stock $10 par Paid In Capital Retained Earnings Total Liabilities & Equity