Question

In: Accounting

On January 1, 2019, Portugal Corporation bought 90% of the stock of Sweden Corporation for $500,000...

On January 1, 2019, Portugal Corporation bought 90% of the stock of Sweden Corporation for $500,000 (with cash). The NCI at date of acquisition was valued at $55,555.56. The Balance Sheets of the two companies immediately after Portugal acquired (January 1, 2019) Sweden Corporation showed the following amounts:

            Portugal        Sweden

Cash                                                  $   90,000    $ 110,000

Accounts Receivable                             160,000         40,000

Inventory                                              500,000       290,000

Land                                                  1,100,000       140,000

Buildings & Equipment - Net           1,000,000       420,000

Copyrights                                            100,000                  0

Investment in Sweden                          500,000                  0

     Total Assets                       $3,450,000   $1,000,000

Accounts Payable                             $ 410,000       200,000

Bonds Payable                                  1,040,000       300,000

Common Stock                                  1,000,000       300,000

Additional Paid in Capital                    200,000         50,000

Retained Earnings                                 800,000       150,000

Total Liabilities and Stockholders' Equity                    $3,450,000   $1,000,000

At the date of acquisition, Portugal owed Sweden $40,000. Also, on the date of acquisition the Book Value of the net assets of Sweden equaled its Fair Value. Any difference between the purchase price plus the value of the NCI and the Fair Value of the net assets is attributed to Goodwill. Portugal uses the equity method for its investment in Sweden. Required:

1. List all journal entries that Portugal made to record its investment in Sweden on the date of acquisition.

2. List all Elimination Entries that would need to be made in order to prepare a work paper for the consolidated Balance Sheet of Portugal and Sweden immediately after the combination (January 1, 2019).

3. Prepare a work paper for the consolidated Balance Sheet of Portugal and Sweden immediately after the combination (January 1, 2019). Show all necessary elimination entries in their proper columns. Use a letter coding system for each elimination entry. Use Figure 5-2 for general format, and syllabus for additional formal requirements. CHECK FIGURE: Consolidated Assets = $3,965,555.56

Solutions

Expert Solution

Acquisition analysis
Net asset book value
Common stock 300000
APIC 50000
Retained earnings 150000
500000
NCI 55555.56
Parent Purchase price 500000
Goodwill 55555.56
Portugal investment
Investment in Sweden 500000
To cash 500000
Elimination entries
Common stock 300000
APIC 50000
Retained earnings 150000
To investment in Sweden 450000
To NCI in NA 50000
Goodwill 55555.56
To investment in Sweden 50000
To NCI in NA 5555.556
Accounts payable 40000
To accounts receivable 40000
Workpaper
Portugal Sweden Dr Cr Consolidated
Cash 90000.00 110000.00 200000.00
Accounts receivable 160000.00 40000.00 40000.00 160000.00
inventory 500000.00 290000.00 790000.00
Land 1100000.00 140000.00 1240000.00
Buildings & Equipment-Net 1000000.00 420000.00 1420000.00
Copyrights 100000.00 0.00 100000.00
Investment in Sweden 500000.00 0.00 500000.00 0.00
Goodwill 55555.56 55555.56
Total assets 3450000.00 1000000.00 3965555.56
Accounts payable 410000.00 200000.00 40000.00 570000.00
Bonds payable 1040000.00 300000.00 1340000.00
Common stock 1000000.00 300000.00 300000.00 1000000.00
Additional Paid in capital 200000.00 50000.00 50000.00 200000.00
Retained earnings 800000.00 150000.00 150000.00 800000.00
NCI 55555.56 55555.56
Total liabilities and stockholders' equity 3450000.00 1000000.00 3965555.56

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

On January 1, 2019, Warren Corporation had 500,000 shares of common stock outstanding. On Apr 1,...
On January 1, 2019, Warren Corporation had 500,000 shares of common stock outstanding. On Apr 1, the corporation issued 100,000 new shares to raise additional capital. On June 1, the corporation declared and issued a 2-for-1 stock split. On October 1, the corporation purchased on the market 300,000 of its own outstanding shares and retired them. Instructions Compute the weighted average number of shares to be used in computing earnings per share for 2019.
Tudor Company acquired $500,000 of Carr Corporation bonds for $487,706.69 on January 1, 2019. The bonds...
Tudor Company acquired $500,000 of Carr Corporation bonds for $487,706.69 on January 1, 2019. The bonds carry an 11% stated interest rate, pay interest semiannually on January 1 and July 1, were issued to yield 12%, and are due January 1, 2022. Required: 1. Prepare an investment interest income and discount amortization schedule using the: a. straight-line method b. effective interest method 2. Prepare the July 1, 2021, journal entries to record the interest income under both methods. 1a. Prepare...
Petunia Corporation acquired 90 percent of the stock of Spring Company on January 1, 20X2, for...
Petunia Corporation acquired 90 percent of the stock of Spring Company on January 1, 20X2, for $360,000. At that date, the fair value of the noncontrolling interest was $40,000. Spring’s balance sheet contained the following amounts at the time of the combination: Cash $ 20,000 Accounts Payable $ 25,000 Accounts Receivable 60,000 Bonds Payable 75,000 Inventory 70,000 Common Stock 100,000 Buildings and Equipment (net) 350,000 Retained Earnings 300,000 Total Assets $ 500,000 Total Liabilities & Equity $ 500,000    During...
On June 4, 2002, Fred bought stock at a cost of $8,000. On January 30, 2019,...
On June 4, 2002, Fred bought stock at a cost of $8,000. On January 30, 2019, he gave the stock to his son, George. At the time of the gift, the fair market value of the stock was $6,500. On May 1, 2019, George sold the stock. State whether there is a short-term or long-term capital gain or loss, and the amount of the gain or loss, if the stock was sold at $7,000.
Yosef Corporation acquired 90% of the outstanding voting stock of Randeep Inc. on January 1, Year...
Yosef Corporation acquired 90% of the outstanding voting stock of Randeep Inc. on January 1, Year 6. During Year 6, intercompany sales of inventory of $45,000 (original cost of $27,000) were made. Only 20% of this inventory was still held within the consolidated entity at the end of Year 6 and was sold in Year 7. Intercompany sales of inventory of $60,000 (original cost of $33,000) occurred in Year 7. Of this merchandise, 30% had not been resold to outside...
Today is 1 January 2019. Kim is looking for an investment that will give her $500,000...
Today is 1 January 2019. Kim is looking for an investment that will give her $500,000 in 5 years’ time so that she will have a sufficient deposit to purchase a $2.5m house in Sydney. Currently she has saved about $380,000 to contribute to the deposit. She has started looking at Treasury bonds as she thinks they are a relatively low risk investment. However, she did not study finance at University so does not have a good understanding of Treasury...
Public Corporation acquired 90 percent of Station Company’s voting common stock on January 1, 20X1, for...
Public Corporation acquired 90 percent of Station Company’s voting common stock on January 1, 20X1, for $502,200. At the time of the combination, Station reported common stock outstanding of $129,000 and retained earnings of $384,000, and the fair value of the noncontrolling interest was $55,800. The book value of Station’s net assets approximated market value except for patents that had a market value of $45,000 more than their book value. The patents had a remaining economic life of five years...
On January 1, 20X1, Pesto Corporation purchased 90 percent of Sauce Corporation's common stock at underlying...
On January 1, 20X1, Pesto Corporation purchased 90 percent of Sauce Corporation's common stock at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 10 percent of Sauce Corporation's book value. Pesto uses the equity method in accounting for its investment in Sauce. The stockholders' equity section of Sauce at January 1, 20X5, contained the following balances: Common Stock ($5 par) $ 400,000 Additional Paid-in Capital 200,000 Retained Earnings 790,000 Accumulated Other Comprehensive...
Public Corporation acquired 90 percent of Station Company’s voting common stock on January 1, 20X1, for...
Public Corporation acquired 90 percent of Station Company’s voting common stock on January 1, 20X1, for $501,300. At the time of the combination, Station reported common stock outstanding of $121,000 and retained earnings of $381,000, and the fair value of the noncontrolling interest was $55,700. The book value of Station’s net assets approximated market value except for patents that had a market value of $55,000 more than their book value. The patents had a remaining economic life of ten years...
Parent Corporation paid $400,000 cash for 90% of Subsidiary Corporation's common stock on January 1, 2006,...
Parent Corporation paid $400,000 cash for 90% of Subsidiary Corporation's common stock on January 1, 2006, when Subsidiary had $300,000 capital stock and $100,000 retained earnings. Th book value of Subsidiary's assets and liabilities were equal to fair values. During 2006, Subsidiary reported net income of $20,000 and declared $10,000 in dividends on December 31. Balance sheets for Parent and Subsidiary at December 31, 2006, are as follows (in thousands): Parent Subsidiary Assets Cash $                              42 $                            20 Receivable -...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT