Question

On January 2, 2020, Parrot purchased 75% of Sally Company's stock for $430,000 cash. At this...

On January 2, 2020, Parrot purchased 75% of Sally Company's stock for $430,000 cash. At this date, the book value of Sally Company's assets included land that had a book value $70,000 and a market value of $85,000. Sally Company's equity consisted of $200,000 common stock and $300,000 retained earnings.

a) Provide the entry to record the purchase on Parrot Company's books:

b) How much goodwill will be recognized in consolidation?   $ __________

c) Provide the consolidation elimination entry that would be required to consolidate the statements at January 2, 2020:

Business   Accounting   
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Answer #1
a.) Date Account Titles Debit $ Credit $
January 2,2020 Investment in Sally Company 430,000
Cash 430,000
b.) Purchase Consideration    430,000
Add: Non-Controlling interest    128,750
( 515,000 x 25% )
Less: Net Assets at fair value - 515,000
(200,000 + 300,000 + ( 85,000 - 70,000 ) )
Goodwill $ 43,750
c.) Date Account Titles Debit $ Credit $
January 2,2020 Common Stock -Sally Company 200,000
Retained earnings-Sally Company 300,000
Land ( Fair value in excess of Book value )     15,000
Goodwill     43,750
Investment in Sally Company 430,000
Non Controlling Interest 128,750
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