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On January 1, 2012, Parker Company purchased 90% of the outstanding common stock of Sid Company...

On January 1, 2012, Parker Company purchased 90% of the outstanding common stock of Sid Company for $180,000. At that time, Sid’s stockholders’ equity consisted of common stock, $120,000; other contributed capital, $20,000; and retained earnings, $25,000. Assume that any difference between book value of equity and the value implied by the purchase price is attributable to land. On December 31, 2012, the two companies’ trial balances were as follows:

Parker Sid
Cash $65,000 $35,000
Accounts Receivable 40,000 30,000
Inventory 25,000 15,000
Investment in Sid Company 184,500 —0—
Plant and Equipment 110,000 85,000
Land 48,500 45,000
Dividends Declared 20,000 15,000
Cost of Goods Sold 150,000 60,000
Operating Expenses 35,000 15,000
    Total Debits $678,000 $300,000
Accounts Payable $20,000 $15,000
Other Liabilities 15,000 25,000
Common Stock 200,000 120,000
Other Contributed Capital 70,000 20,000
Retained Earnings, 1/1 55,000 25,000
Sales 300,000 95,000
Equity in Subsidiary Income 18,000 —0—
    Total Credits $678,000

$300,000

Prepare a consolidated statements workpaper on December 31, 2012. (Round answers to 0 decimal places, e.g. 5,125. List items that increase retained earnings first.)

Solutions

Expert Solution

Common stock of Sid Company for

180000

% of acquired by parker company

90.00%

Fair value of Sid company on date of acquisition (180000/0.90)

200000

Common stock

120000

Other contributed capital

20000

Retained earnings

25000

Book value of Sid company

165000

Fair value of Sid company on date of acquisition

200000

Less: Book value of Sid company

165000

Undervalued of land

35000

Non-controlling interest

Common Stock (120000*10%)

12000

Other Contributed Capital (20000*10%)

2000

Retained Earnings, 31/12 (30000*10%)

3000

Undervalued of land (35000*10%)

3500

Non-controlling interest

20500

Elimination entries

Parker

Sid

Debit

Credit

Consolidation

Sales

300000

95000

395000

Less: Cost of Goods Sold

150000

60000

210000

Gross profit

150000

35000

185000

Less: Operating Expenses

35000

15000

50000

Operating profit

115000

20000

135000

Equity in Subsidiary Income

18000

0

18000

0

Net income

133000

20000

18000

0

135000

Retained Earnings, 1/1

55000

25000

22500

57500

Net income

133000

20000

18000

0

135000

Less: Dividends Declared

20000

15000

13500

48500

Retained Earnings, 31/12

168000

30000

27000

0

86500

Assets

Current assets

Cash

65000

35000

100000

Accounts Receivable

40000

30000

70000

Inventory

25000

15000

40000

Non-current assets

Investment in Sid Company

184500

184500

0

Plant and Equipment

110000

85000

195000

Land

48500

45000

35000

128500

Total assets

473000

210000

533500

Liability and equity

Accounts Payable

20000

15000

35000

Other Liabilities

15000

25000

40000

Stock holder's equity

Common Stock

200000

120000

120000

200000

Other Contributed Capital

70000

20000

20000

70000

Retained Earnings, 31/12

168000

30000

30000

0

168000

Non-controlling interest

20500

20500

Total liability and equity

473000

210000

533500

Journal entries

205000

205000

Total of Debit side must be equal to total of credit side for journal entries

ekkarill92 answered 2 years ago
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