Using equity method for Paul Company acquired 85% of the common stock of Sam Company January 1, year one, for The consideration given was proportional to Sarni' fair value. On that date, Sam had the following triaI balanoe: account debit credit Additional paid in capital Building (12-year life) $250,000 $100'000 Common stock 170,000 Current assets 170,000 Equipment6-yr life) 160,000 Land 110,000 Liabilities (due in 4 years) 300,000 Retained earnings 1/year 1 120,000 $510'000 Totals $'690,000 $690,000 During year one, Sam reported net income of During year one, Sam paid dividends of During year two, Sam reported net income of During year two, Sam paid dividends of On January 1, year one, fair values were: Land $134,000 Building $262,000

Equipment $172,000

There was no impairment of any goodwill arising from the acquisition.

$60'000

$30'000

$80'000

$40'000

Please indicate clearly which method you choose for Paul to use to account for its acquisition of Sam Company.

Problem 4. Use the data for the Paul Company acquisition of the Sam Company to prepare the consolidation worksheet entries

for December 31 of year one. Use the entry labels like S, A, I, and so on for clarity.

Problem 5. Use the data for the Paul Company acquisition of the Sam Company to prepare the consolidation worksheet entries

for December 31 of year two.