Pillow Corporation acquired 80 percent ownership of Sheet Company on January 1, 20X7, for $173,000. At...

Pillow Corporation acquired 80 percent ownership of Sheet Company on January 1, 20X7, for $173,000. At that date, the fair value of the noncontrolling interest was $43,250. The trial balances for the two companies on December 31, 20X7, included the following amounts:

	Pillow Corporation						Sheet Company
Item	Debit			Credit			Debit			Credit
Cash		$	38,000					$	25,000
Accounts Receivable			50,000						55,000
Inventory			240,000						100,000
Land			80,000						20,000
Buildings & Equipment			500,000						150,000
Investment in Sheet Company			202,000
Cost of Goods Sold			500,000						250,000
Depreciation Expense			25,000						15,000
Other Expenses			75,000						75,000
Dividends Declared			50,000						20,000
Accumulated Depreciation					$	155,000					$	75,000
Accounts Payable						70,000						35,000
Mortgages Payable						200,000						50,000
Common Stock						300,000						50,000
Retained Earnings						290,000						100,000
Sales						700,000						400,000
Income from Sheet Company						45,000
		$	1,760,000		$	1,760,000		$	710,000		$	710,000

Additional Information

On January 1, 20X7, Sheet reported net assets with a book value of $150,000 and a fair value of $191,250. Accumulated depreciation on Buildings and Equipment was $60,000 on the acquisition date.
Sheet’s depreciable assets had an estimated economic life of 11 years on the date of combination. Goodwill of $25,000 was recorded at the acquisition.
Pillow used the equity method in accounting for its investment in Sheet.
Detailed analysis of receivables and payables showed that Sheet owed Pillow $16,000 on December 31, 20X7.

a. Prepare all journal entries recorded by Pillow with regard to its investment in Sheet during 20X7.Record the initial investment in Sheet Company

Record the initial investment in Sheet Company
B

Record Pillow Corporation's 80% share of Sheet Company's 20X7 income.
C

Record Pillow Corporation's 80% share of Sheet Company's 20X7 dividend.
D

Record the amortization of the excess acquisition price.

Expert Solution

ekkarill92 answered 6 months ago

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