Question

Prepare a consolidated workpapers and journal enteries for the following scenarios: Include calculations

Parent Corporation acquired a 70 percent interest in Subsidiary Corporation’s outstanding voting common stock on January 1, 2011, for $735,000 cash. The stockholders’ equity of Subsidiary on this date consisted of $750,000 capital stock and $150,000 retained earnings. The difference between the fair value of Subsidiary and the underlying equity acquired in Subsidiary was assigned $7,500 to Subsidiary’s undervalued inventory, $21,000 to undervalued buildings, $31,500 to undervalued equipment, and remainder assigned to goodwill. The undervalued inventory items were Sold during 2011, and the undervalued buildings and equipment had remaining useful lives of seven years and three years, respectively. Depreciation is straight line. At December 31, 2011, Subsidiary’s accounts payable include $10,000 owed to Parent. This $10,000 account payable is due on January 15, 2012. Parent sold equipment to outsiders with a book value of $15,000 for $25,000 on June 1, 2011. This is not an intercompany sale transaction. Separate financial statements for Parent and Subsidiary for 2011 are shown on the consolidated worksheet tab (in thousands).

Answer 1