UNIT 4 POST PROBLEM 1 On December 31, 200X P 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 Assets Cash Inventories Plant Total 580,000 60,000 340,000 980,000 Liabilities and Equity Liabilities Common Stock, $5pv Paid in Capital Retained Earnings Total 90,000 100,000 200,000 590,000 980,000 S Company Assets Inventories Other assets Plant Total 20,000 40,000 140,000 200,000 S market values are: Plant Inventory Liabilities and Equity Liabilities 30,000 Long Term Debt 50,000 Common Stock, $10pv 40,000 Paid in Capital 20,000 Retained Earnings 60,000 Total 200,000 $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. UNIT 4 POST PROBLEM 1 TEMPLATE P CORPORATION AND S CO. Working Paper for Consolidated Balance Sheet 12/31/200X 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. Compuation of Goodwill 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 P Corporation S Company Net Assets at Book Value Inventory Other Assets Plant Liabilities Long Term Debt Net Assets at Book Net Assets at Market Paid $300,000 for 80% Noncontrolling interest 20% Acquisition date fair value Fair Market Value Goodwill 115,000 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 S Company Debit Credit Consolidated Assets Cash Inventories Other Assets Investment in S 115,000 Goodwill Allocation to Controlling and Noncontrolling Interest Total Controlling Fair value at acquisition date Relative fair value of S Company net assets (80% and 20%) Goodwill 115,000 Plant Goodwill Total Assets P Corporation Consolidated Balance Sheet Assets Liabilities and Equity Cash Current Liabilities Inventory Long Term debt Other Assets Noncontrolling Interest Plant Common Stock 5 Par Paid In Capital Goodwill Retained Earnings Total Total 115,000 Noncontrolling Liabilities & Equity Current Liabilities Long Term Debt Noncontrolling Interest 75,000 Controlling interest - 80% Noncontrolling interest - 20% Goodwill 115,000 Noncontrolling Interest 20% of 260,000 + 23,000 goodwill = 75,000 Common Stock $5 par Common Stock $10 par Paid In Capital Retained Earnings Total Liabilities & Equity Consolidation Entry A: Plant Inventory Goodwill Investment in S Company Noncontrolling interest Allocate subsidiary acquisition date fair value adjustments Noncontrolling 75,000 52,000 23,000
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