On January 1, 2015, Pack Co. acquired 80% of the common stock of Sack Co. by...

On January 1, 2015, Pack Co. acquired 80% of the common stock of Sack Co. by paying $80,000. On that date Sack' land was undervalued $3,800 and its Buildings (7 yr life) were undervalued $4,200 and its equipment (5 Yr life) were undervalued $2,000. A. Show the elements making of the cost of the investment. (Hint: Set up a schedule showing the controlling and non-controlling interest in the individual elements) B. Prepare consolidation entry S to eliminate the sub’s equity accounts at 12/31/15: C. Prepare consolidation entry A (acquisition) D. Prepare consolidation entry I (income) E. Prepare consolidation entry D (dividends) F. Prepare consolidation entry E (expenses)

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Expert Solution

A	Elements making cost of investment

	Computation of Goodwill	Total	Pack Co. (80%)	NCI (20%)
	Consideration paid to acquire 80% stock		$80,000
	Fair value of 20% noncontrolling interest			$20,000
	Total fair value	$100,000	$80,000	$20,000
	Less: Book Value
	Total Book value	$90,000	$72,000	$18,000
	Excess of fair value over book value	$10,000	$8,000	$2,000
	Excess allocated to:
	Land	$3,800	$3,040	$760
	Building	$4,200	$3,360	$840
	Equipment	$2,000	$1,600	$400

B	Consolidation entry S
	Common Stock	$90,000
	Investment in Sack Co.		$72,000
	Non-controlling Interest		$18,000

C	Consolidation entry A
	Land	$3,800
	Building	$4,200
	Equipment	$2,000
	Investment in Sack Co.		$8,000
	Non-controlling Interest		$2,000

D	Consolidation Entry I
	Need income details of Sack Co.

E.	Consolidation Entry D
	Need information about dividend distribution by Sack Co.

F	Consolidation Entry E
	Depreciation expense	$1,000
	Building (4200/7)		$600
	Equipment (2000/5)		$400

ekkarill92 answered 1 year ago

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