On January 1, 2019, Roxy Corp. issued shares of its common stock to acquire all of the outstanding common stock of Westwood Inc. Westwood's book value was only $140,000 at the time, but Roxy issued 12,000 shares having a par value of $1 per share and a fair value of $20 per share. Roxy was willing to convey these shares because it felt that buildings (ten-year life) were undervalued on Westwood's records by $60,000 while equipment (five-year life) was undervalued by $25,000. Any consideration transferred over fair value of identified net assets acquired is assigned to goodwill.
Following are the individual financial records for these two companies for the year ended December 31, 2022.
|Equity in subsidiary earnings||25,000||0|
|Retained earnings, January 1, 2022||$||765,000||$||102,000|
|Net income (above)||133,000||36,000|
|Retained earnings, December 31, 2022||$||814,000||$||114,000|
|Investment in Westwood Inc.||242,000||0|
|Additional paid-in capital||50,000||0|
|Retained earnings, December 31, 2022 (above)||814,000||114,000|
|Total liabilities and stockholders’ equity||$||1,306,250||$||236,000|
1. Prove investment bal in Westwood $242,000
2. Prepare a consolidation worksheet Entries (only entries S, A, I, D, E, or P if necessary; no need for whole worksheet) for this business combination.
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