Question

P4-37A Push-Down Accounting LO 4-7

On December 31, 20X6, Print Corporation and Size Company entered into a business combination in which Print acquired all of Size’s common stock for $958,000. At the date of combination, Size had common stock outstanding with a par value of $118,000, additional paid in capital of $419,000, and retained earnings of $176,000. The fair values and book values of all Size’s assets and liabilities were equal at the date of combination, except for the following:

	Book Value				Fair Value
Inventory		$	61,000			$	66,000
Land			93,000				177,000
Buildings			419,000				510,000
Equipment			510,000				575,000

The buildings had a remaining life of 15 years, and the equipment was expected to last another 5 years. In accounting for the business combination, Print decided to use push-down accounting on Size’s books.

During 20X7, Size earned net income of $104,000 and paid a dividend of $58,000. All of the inventory on hand at the end of 20X6 was sold during 20X7. During 20X8, Size earned net income of $106,000 and paid a dividend of $58,000.

Required:
a. Record the acquisition of Size's stock on Print's books on December 31, 20X6. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

b. Record any entries that would be made on December 31, 20X6, on Size’s books related to the business combination if push-down accounting is employed. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

c. Present all consolidating entries that would appear in the worksheet to prepare a consolidated balance sheet immediately after the combination. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

d. Present all entries that Print would record during 20X7 related to its investment in Size if Print uses the equity-method of accounting for its investment. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

e. Present all consolidating entries that would appear in the worksheet to prepare a full set of consolidated financial statements for the year 20X7. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

f. Present all consolidating entries that would appear in the worksheet to prepare a full set of consolidated financial statements for the year 20X8. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1