In: Accounting
Required:
Requirement 1
Book Value of Net Asset (350,000 + 50,000) | $400,000 |
Add: Excess of Fair Value over book value | |
Land |
$20,000 |
Equipment |
$18,000 |
Total | $438,000 |
P Company's share = $438,000 * 80% = $350,400
Amount paid by P to acquire 80% of S = $400,000
Therefore amount attributable to Patents out of P's share = $400,000 - $350,400 = $49,600
Therefore total value of Patent = $49600 / 80% = 62,000
Journal Entry in the books of P
Date | Accounts | Debit | Credit |
January 1, 2019 | Investment | $400,000 | |
Cash | $400,000 | ||
(to record purchase of S for cash) | |||
December 31, 2019 | Investment | $16000 | |
Equity in earning (I/S) | $16000 | ||
(to record subsidiary income) | |||
December 31, 2019 | Cash | $2,400 | |
Investment | $2,400 | ||
(to record the receipt of dividend) | |||
December 31, 2019 | Equity in Earnings (I/S) | $1,800 | |
Investment | $1,800 | ||
( Depreciation of excess FV of equipment) | |||
December 31, 2019 | Equity in Earnings (I/S) | $4,960 | |
Investment | $4,960 | ||
( Amortization of Patent) |
Requirement 2
Consolidation entries
Date | Accounts | Debit | Credit |
December 31, 2019 | Common Stock - Sub | 350,000 | |
Retained Earning - Sub | 67,000 | ||
Excess FV over BV | 35,750 | ||
Patent | 55,800 | ||
Investment in Sub | 406840 | ||
Non Controlling Interest | 101,710 |
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