Question

Prepare journal entries to eliminate Porter Company's investment in Sewell Company in the preparation of a...

Prepare journal entries to eliminate Porter Company's investment in Sewell Company in the preparation of a consolidated balance sheet at the date of acquisition for the following case:

Sewell Company Equity Balances

Cash

Percent of Stock Owned

Investment Cost

Common Stock

Other Contributed Capital

Retained Earnings

75

$450,000

$145,000

$190,000

$55,000


There is no difference between the book value of net assets acquired and the fair values. Prepare the ELIMINATION journal entries.

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Answer #1

Journal Entry

Account Titles Debit $ Credit $
Common Stock 145,000
Other Contributed Capital 190,000
Retained earnings       55,000
Investment in Swell Company 450,000
Goodwill 157,500
Non-Controlling Interest     97,500
Working
Amount $
Purchase Consideration 450,000
Add: Non controlling Interest       97,500
(390,000 x 25% )
Less: Net Assets 390,000
(145000 + 190000 + 55000 )
Goodwill 157,500
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