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In: Accounting

Pointure Company acquired 80 percent of Souby Company’s outstanding common stock for $664,000 on January 1,...

  1. Pointure Company acquired 80 percent of Souby Company’s outstanding common stock for $664,000 on January 1, 2019, when the book value of Souby’s net assets was equal to $830,000. Pointure uses the equity method to account for investments. Trial Balance items for Pointure and Souby as of December 31, 2019, are as follows:

Pointure

Souby

Debit

Credit

Debit

Credit

Cash

125,000

70,000

Accounts Receivable

396,000

90,000

Inventory

450,000

200,000

Investment in Souby

868,000

Plant & Equipment

755,000

585,000

Other Assets

390,000

230,000

Dividends Declared

50,000

25,000

Revenue

1,140,000

800,000

Salaries Expenses

680,000

325,000

Other Expense

250,000

195,000

Accounts Payable

105,000

30,000

Other Liabilities

95,000

60,000

Common Stock

900,000

350,000

Retained Earnings

1,500,000

480,000

Income From Souby

224,000

Total

3,964,000

3,964,000

1,720,000

1,720,000

  1. Prepare the journal entries on Pointure’s books for the acquisition of Souby on January 1, 2019, as well as any normal equity method entry(ies) related to the investment in Souby Company during 2019.

  1. Give the elimination entry or entries needed to prepare consolidated Financial statements immediately following the business combination

  1. Prepare a consolidation worksheet for 2019 in good form.

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Expert Solution

Solution:

ekkarill92 answered 2 years ago
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