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In: Accounting

On January 1, 2018, Pony Corporation issued its stock with a fair value of $471,000 for...

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

Solutions

Expert Solution

ekkarill92 answered 9 months ago
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