Question

Punk Corporation purchased 80 percent of Soul Corporation’s stock on January 1, 20X2. At that date, Soul reported retained earnings of $80,000 and had $120,000 of stock outstanding. The fair value of its buildings was $32,000 more than the book value.

Punk paid $190,000 to acquire the Soul shares. At that date, the noncontrolling interest had a fair value of $47,500. The remaining economic life for all Soul’s depreciable assets was eight years on the date of combination. The amount of the differential assigned to goodwill is not impaired. Soul reported net income of $40,000 in 20X2 and declared no dividends.

Required:
a. Prepare the consolidation entries needed to prepare a consolidated balance sheet immediately after Punk purchased Soul stock. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

b. Prepare all consolidation entries needed to prepare a full set of consolidated financial statements for 20X2. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

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Acquisition Price by Pioneer		$     190,000
Non Controlling Interest		$       47,500
Total Fair Value		$     237,500
Less: Book Value		$   (200,000)
Excess Fair Value		$       37,500
Allocation:
Building		$       32,000
Goodwill		$          5,500
Part a
Investment in Soul corporation	$   190,000
Cash		$     190,000
Common Stock	$   120,000
Retained Earning	$      80,000
Investment in Soul corporation		$     160,000
NCI in NA of Soul Corporation		$       40,000
Building	$      32,000
Goodwill	$        5,500
Investment in Soul corporation		$       30,000
NCI in NA of Soul Corporation		$          7,500
Part b
Investment in Soul corporation	$      32,000
Income from Soul Corporation		$       32,000
Income from Soul Corporation	$        3,200
Investment in Soul corporation		$          3,200
Common Stock	$   120,000
Retained Earning	$      80,000
Income from Soul Corporation ($40,000*80%)	$      32,000
NCI in NI of Soult Corporation ($40,000*20%)	$        8,000
Investment in Soul corporation		$     192,000
NCI in NA of Soul Corporation		$       48,000
Depreciation Expense	$        4,000
Income from Soul Corporation ($4,000*80%)		$          3,200
NCI in NI of Soult Corporation ($4,000*20%)		$             800
Building	$      32,000
Goodwill	$        5,500
Accumulated Depreciation		$          4,000
Investment in Soul corporation		$       26,800
NCI in NA of Soul Corporation		$          6,700