Place Company purchased 92% of
Place Company purchased 92% of the common stock of Shaw, Inc. onJanuary 1, 2017, for $400,000. Trial balances at the end of 2017for the companies were:
|
Place |
Shaw |
|
|
Cash |
$ 80,350 |
$ 87,000 |
|
Accounts and Notes Receivable |
200,000 |
210,000 |
|
Inventory, 1/1 |
70,000 |
50,000 |
|
Investment in Shaw, Inc. |
400,000 |
—0— |
|
Plant Assets |
300,000 |
200,000 |
|
Dividends Declared |
35,000 |
22,000 |
|
Purchases |
240,000 |
150,000 |
|
Selling Expenses |
28,000 |
20,000 |
|
Other Expenses |
15,000 |
13,000 |
|
$1,368,350 |
$752,000 |
|
|
Accounts and Notes Payable |
$ 99,110 |
$ 38,000 |
|
Other Liabilities |
45,000 |
15,000 |
|
Common Stock, $10 par |
150,000 |
100,000 |
|
Other Contributed Captial |
279,000 |
149,000 |
|
Retained Earnings, 1/1 |
225,000 |
170,000 |
|
Sales |
550,000 |
280,000 |
|
Dividend Income |
20,240 |
—0— |
|
$1,368,350 |
$752,000 |
Inventory balances on December 31, 2017, were $25,000 for Placeand $15,000 for Shaw, Inc. Shaw’s accounts and notes payablecontain a $15,000 note payable to Place.
Required:
Prepare a workpaper for the preparation of consolidatedfinancial statements on December 31, 2012. The difference betweenbook value of equity acquired and the value implied by the purchaseprice relates to subsidiary land, which is included in plantassets.
Answer:
Notes:
. *62,000*0.08 = 4,960 (This is a non-controlling interest so itwill not appear in the consolidated balances)
(1) To eliminate intercompany dividends
(2) To allocate the difference between implied and book value toGoodwill. The same denoted in the common stocks and othercontributed capital of Shaw inc.
(3) To adjust the Plant assets adjustments
(4) To eliminate the differences between accounts and notesreceivables and accounts and notes payable
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