Question

Pretzel Corporation acquired 100 percent of Stick Company’s outstanding shares on January 1, 20X7. Balance sheet data for the two companies immediately after the purchase follow:

	Pretzel Corporation				Stick Company
Cash	$	87,000			$	31,000
Accounts Receivable		96,000				53,000
Inventory		87,000				83,000
Buildings & Equipment		419,000				289,000
Less: Accumulated Depreciation		(150,000	)			(89,000	)
Investment in Stick Company		318,000
Investment in Stick Company Bonds		58,000
Total Assets	$	915,000			$	367,000
Accounts Payable	$	58,000			$	24,000
Bonds Payable		189,000				118,000
Common Stock		296,000				155,000
Capital in Excess of Par						145,000
Retained Earnings		372,000				(75,000	)
Total Liabilities & Equities	$	915,000			$	367,000

As indicated in the parent company balance sheet, Pretzel purchased $58,000 of Stick’s bonds from the subsidiary at par value immediately after it acquired the stock. An analysis of intercompany receivables and payables also indicates that the subsidiary owes the parent $11,000. On the date of combination, the book values and fair values of Stick’s assets and liabilities were the same.

Required:
a. Prepare all consolidation entries needed to prepare a consolidated balance sheet for January 1, 20X7. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) ( 1. Record the basic consolidation entry, 2. Record the excess value, 3. Record the entry to eliminate the intercompany accounts for Bonds Payable. 4.Record the entry to eliminate the remaining intercompany accounts. 5. Record the optional accumulated depreciation consolidation entry.)

b. Complete a consolidated balance sheet worksheet. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)

c. Prepare a consolidated balance sheet. (Amounts to be deducted should be entered with a minus sign.)

Answer 1

.

Solution-a	Journal Entry
	Particular		Amount(Dr)	Amount(Cr)
	Cash A/c Dr		31,000
	Account receivable A/c Dr.		53,000
	Inventory A/c Dr.		83,000
	Buildings & Equipment A/c Dr.		2,00,000
	Loss in purchase on business		93,000
	to Accounts Payable A/c			24,000
	to Bonds Payable A/c			1,18,000
	to Purchase consideration A/c			3,18,000
	(Consolidated Purchase entry)
Solution-B	Working for the consolidation
	Particular	Pretzel Corporation	Stick corporation	Adjustment	Total need to be booked
	Cash	87000	31000	0	118000
	Accounts Receivable	96000	53000	-11000	138000
	Inventory	87000	83000	0	170000
	Buildings & Equipment	419000	289000	0	708000
	Less: Accumulated Depreciation	-1,50,000	-89,000		-239000
	Net Buildings & Equipment	2,69,000	2,00,000	0	4,69,000
	Investment in Stick Company	318000		-318000	0
	Investment in Stick Company Bonds	58000		-58000	0
	Total Assets	9,15,000	3,67,000		8,95,000
					0
	Accounts Payable	58000	24000	-11000	71,000
	Bonds Payable	189000	118000	-58000	2,49,000
	Common Stock	296000	155000	-155000	2,96,000
	Capital in Excess of Par		145000	-145000	-
	Retained Earnings	372000	-75,000	-18000	2,79,000
	Total Liabilities & Equities	915000	367000		8,95,000
	Note :- 1. in Account receivable, 11,000 need to be deducted since it is intergroup transactions
	2. Intergroup Bonds Bonds need to be eliminated , since they belongs to parents and subsidiray transactions itself.
	3 In Account Payable, 11,000 need to be deducted since it is intergroup transactions
	4. Loss of 93,000 is adjusted loss is deducted through retained earning of parent company
Solution-C	Consolidated Balance Sheet
	Particular	Total need to be booked
	Cash	118000
	Accounts Receivable	138000
	Inventory	170000
	Buildings & Equipment	708000
	Less: Accumulated Depreciation	-239000
	Net Buildings & Equipment	4,69,000
	Investment in Stick Company	0
	Investment in Stick Company Bonds	0
	Total Assets	8,95,000
	Accounts Payable	71,000
	Bonds Payable	2,49,000
	Common Stock	2,96,000
	Capital in Excess of Par	&nbs ekkarill92 Next > < Previous Related Solutions Pretzel Corporation owns 60 percent of Stick Corporation’s voting shares. On January 1, 20X2, Pretzel Corporation... Pretzel Corporation owns 60 percent of Stick Corporation’s voting shares. On January 1, 20X2, Pretzel Corporation sold $180,000 par value, 6 percent first mortgage bonds to Stick for $185,000. The bonds mature in 10 years and pay interest semiannually on January 1 and July 1. a. Prepare the journal entries for 20X2 for Stick related to its ownership of Pretzel’s bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do... Patrick Corporation acquired 100 percent of O’Brien Company’s outstanding common stock on January 1 for $711,300... Patrick Corporation acquired 100 percent of O’Brien Company’s outstanding common stock on January 1 for $711,300 in cash. O’Brien reported net assets with a carrying amount of $396,000 at that time. Some of O’Brien’s assets either were unrecorded (having been internally developed) or had fair values that differed from book values as follows: Book Values Fair Values Trademarks (indefinite life) $ 107,000 $ 299,000 Customer relationships (5-year remaining life) 0 104,400 Equipment (10-year remaining life) 393,000 340,800 Any goodwill is... Patrick Corporation acquired 100 percent of O’Brien Company’s outstanding common stock on January 1, for $653,100... Patrick Corporation acquired 100 percent of O’Brien Company’s outstanding common stock on January 1, for $653,100 in cash. O’Brien reported net assets with a carrying amount of $389,000 at that time. Some of O’Brien’s assets either were unrecorded (having been internally developed) or had fair values that differed from book values as follows: Book Values Fair Values Trademarks (indefinite life) $ 84,000 $ 217,000 Customer relationships (5-year remaining life) 0 102,000 Equipment (10-year remaining life) 364,000 316,000 Any goodwill is... Patrick Corporation acquired 100 percent of O’Brien Company’s outstanding common stock on January 1, for $796,500... Patrick Corporation acquired 100 percent of O’Brien Company’s outstanding common stock on January 1, for $796,500 in cash. O’Brien reported net assets with a carrying amount of $448,000 at that time. Some of O’Brien’s assets either were unrecorded (having been internally developed) or had fair values that differed from book values as follows: Book Values Fair Values Trademarks (indefinite life) $ 102,000 $ 299,000 Customer relationships (5-year remaining life) 0 96,600 Equipment (10-year remaining life) 359,000 329,000 Any goodwill is... 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... Prince Corporation acquired 100 percent of Sword Company on January 1, 20X7, for $195,000. The trial... Prince Corporation acquired 100 percent of Sword Company on January 1, 20X7, for $195,000. The trial balances for the two companies on December 31, 20X7, included the following amounts: Prince Corporation Sword Company Item Debit Credit Debit Credit Cash $ 83,000 $ 31,000 Accounts Receivable 67,000 72,000 Inventory 177,000 104,000 Land 81,000 26,000 Buildings and Equipment 491,000 159,000 Investment in Sword Company 255,000 Cost of Goods Sold 491,000 253,000 Depreciation Expense 21,000 11,000 Other Expenses 66,000 66,000 Dividends Declared 52,000... Prince Corporation acquired 100 percent of Sword Company on January 1, 20X7, for $183,000. The trial... Prince Corporation acquired 100 percent of Sword Company on January 1, 20X7, for $183,000. The trial balances for the two companies on December 31, 20X7, included the following amounts: Prince Corporation Sword Company Item Debit Credit Debit Credit Cash $ 88,000 $ 27,000 Accounts Receivable 53,000 58,000 Inventory 182,000 120,000 Land 86,000 22,000 Buildings and Equipment 491,000 155,000 Investment in Sword Company 233,000 Cost of Goods Sold 491,000 258,000 Depreciation Expense 21,000 11,000 Other Expenses 62,000 62,000 Dividends Declared 55,000... On January 1, 20X7, Pepper Company acquired 90 percent of the outstanding common stock of Salt... On January 1, 20X7, Pepper Company acquired 90 percent of the outstanding common stock of Salt Corporation for $1,242,000. On that date, the fair value of noncontrolling interest was equal to $138,000. The entire differential was related to land held by Salt. At the date of acquisition, Salt had common stock outstanding of $520,000, additional paid-in capital of $200,000, and retained earnings of $540,000. During 20X7, Salt sold inventory to Pepper for $440,000. The inventory originally cost Salt $360,000. By... On January 1, 20X7, Pepper Company acquired 90 percent of the outstanding common stock of Salt... On January 1, 20X7, Pepper Company acquired 90 percent of the outstanding common stock of Salt Corporation for $1,242,000. On that date, the fair value of noncontrolling interest was equal to $138,000. The entire differential was related to land held by Salt. At the date of acquisition, Salt had common stock outstanding of $520,000, additional paid-in capital of $200,000, and retained earnings of $540,000. During 20X7, Salt sold inventory to Pepper for $440,000. The inventory originally cost Salt $360,000. By... On January 1, Patterson Corporation acquired 80 percent of the 100,000 outstanding voting shares of Soriano,... On January 1, Patterson Corporation acquired 80 percent of the 100,000 outstanding voting shares of Soriano, Inc., in exchange for $31.25 per share cash. The remaining 20 percent of Soriano’s shares continued to trade for $30 both before and after Patterson’s acquisition. At January 1, Soriano’s book and fair values were as follows Book Values Fair Values Remaining Life Current assets $80,000 $80,000 Buildings and equipment $1,250,000 $1,000,000 5 years Trademarks    $700,000    $900,000 10 years Patented technology   ... ADVERTISEMENT Subjects Accounting Advanced Math Anatomy and Physiology Biology Chemistry Civil Engineering Computer Science Economics Electrical Engineering Finance History Math Mechanical Engineering Operations Management Physics Psychology Statistics and Probability Nursing Other ADVERTISEMENT Latest Questions A neurologist needs to counsel a stroke victim and her husband about possible outcomes, treatment options,... Case Study: Personal Beliefs in the Workplace Don Shakow was a prominent professional who worked in... 1: Competency framework usage is the modern best practice in management. What is meant by competency... A 19.34 g mixture of sugar (C12H22O11) and table salt (NaCl) is dissolved in 231 g... Young and Company claims that its pressurized diving bell will, on average, maintain its integrity to... 1) Alternative compiled code sequence using instructions in classes A, B, C. What is the average... An asset is purchased on January 1 for $48,700. It is expected to have a useful... ADVERTISEMENT About @ 2020 WizEdu