In: Accounting
On January 1, 2018, Pony Corporation issued its stock with a fair value of $471,000 for 60% of the outstanding common stock of Shine Company, which became a subsidiary of Pony. There was no control premium. Differences between book value and fair value of the net identifiable assets of Shine Company on January 1, 2018, were limited to the following:
Book value Fair value
Inventories $ 70,000 $ 67,800
Machine (net) 521,000 551,200
Long-term debt 112,000 115,700
Required:
(i) Prepare working paper eliminating entries E and R (in journal entry format) for Pony Corporation and subsidiary on January 1, 2018.
(ii) Complete the following working paper:
Working paper for consolidated balance sheet on date of business combination, January 1, 2018
Pony |
Shine |
Adjustments & Eliminations |
Consolidated |
||
Debits |
Credits |
||||
Cash |
80,000 |
34,000 |
|||
Inventories |
260,000 |
70,000 |
|||
Investment in Shine |
471,000 |
|
|||
Machine (net) |
760,000 |
521,000 |
|||
|
|||||
Total |
1,571,000 |
625,000 |
|||
Accounts payable |
180,000 |
133,000 |
|||
Long-term debt |
20,000 |
112,000 |
|||
Common stock |
383,000 |
276,000 |
|||
Add. paid-in capital |
673,000 |
||||
Retained earnings |
315,000 |
104,000 |
|||
Total |
1,571,000 |
625,000 |