Question

Pool Company purchased 90% of the outstanding common stock of Spruce Company on December 31, 2014, for cash. At that time the balance sheet of Spruce Company was as follows:

Current assets		$1,123,900
Plant and equipment		976,700
Land		163,170
Total assets		$2,263,770
Liabilities		$847,960
Common stock, $20 par value		849,200
Other contributed capital		459,020
Retained earnings		211,390
Total		2,367,570
Less treasury stock at cost, 5,190 shares		103,800
Total equities		$2,263,770

Prepare the elimination entry required for the preparation of a consolidated balance sheet workpaper on December 31, 2014, assuming the purchase price of the stock was $1,360,300. Assume that any difference between the book value of net assets and the value implied by the purchase price relates to subsidiary land.

Answer 1