Question

On January 1, 2018, Co. P acquired 90% of Co. S for $550,000, plus $15,000 in acquisition costs. On the date of acquisition, Co. S had the following balance sheet:

Assets		Liabilities & Equity
Accounts Receivable	150,000	Current Liabilities	260,000
Inventory	180,000	Bonds Payable	250,000
Land	200,000	Common Stock, $1 Par	400,000
Buildings	550,000	PIC In Excess of Par	70,000
Acc. Deprecition (Bldg)	(100,000)	Retained Earnings	300,000
Equipment	400,000
Acc. Depreciation (Equip)	(120,000)
Goodwill	20,000
Total Assets	1,280,000	Total Liab. & Equity	1,280,000

An appraisal indicates that the following items have fair values that differed from their book values:

Accounts Receivable	140,000
Inventory	200,000
Land	200,000
Buildings	400,000
Equipment	100,000
Patent	300,000
Bonds Payable	220,000

Immediately after the purchase, Co. P had the following balance sheet:

Assets		Liabilities & Equity
Cash	50,000	Current Liabilites	200,000
Accounts Receivable	70,000	Bonds Payable	300,000
Inventory	130,000	Common Stock	150,000
Investment in Co. S	550,000	PIC Excess of Par	200,000
Land	350,000	Retained Earnings	800,000
Buildings	300,000
Acc. Depreciation (Bldg)	(50,000)
Equipment	190,000
Acc. Depreciation	(40,000)
Goodwill	100,000
Total Assets	1,650,000	Total Liab. & Equity	1,650,000

(1) Record the investment in Co. S.

(2) Prepare a value analysis schedule for the Investment in Co. S.

(3) Prepare a determination and distribution schedule for the investment in Co. S.

(4) Prepare all required elimination ertries for the January 1, 2018 consolidated worksheet in general journal form.

*Below is what I have for parts 1-3 so far, but I'm struggling with part 4 (something in 3 may be incorrect).

(1)       Investment in State                                                                550,000

            Acquisition Expense                                                                15,000

                        Cash                                                                                        565,000

(2)

Value Analysis Schedule	Company Implied Value	Parent Price (90%)	NCI Value (10%)
Company Fair Value	611,111	550,000	61,111
Fair Value of Net Assets (exclude G/W)	860,000	774,000	86,000
Gain on Acquisition	(248,889)	(22,400)	(24,889)

(3)

D&D Schedule	Company Implied Value	Parent Price (90%)	NCI Value (10%)
Fair Value of Subsidiary	611,111	550,000	61,111
Less BV of Interest Acquired:
Common Stock	400,000
Paid-In Capital	70,000
Retained Earnings	300,000
Total SH’s Equity	770,000	770,000	770,000
Interest Acquired		90%	10%
Book Value		693,000	77,000
Excess FV over BV	(158,889)	(143,000)	(15,889)
Adjustments to Identifiable Accounts:
Accounts Receivable	(10,000)	Credit
Inventory	20,000	Debit
Buildings	(50,000)	Credit
Equipment	(180,000)	Credit
Patent	300,000	Debit
Goodwill	(20,000)	Credit
Gain on Acquisition	(248,889)	Credit
Decrease on Bonds	30,000	Debit
Total	(158,889)

Answer 1

Dear friend, Correct answer is below:
Ques 2)
You need to go from asset side to licability side. Not from what parent company invested in company S.
therefore below will be correct method

Particular	Amount	Total amount
Fair value of assets:
Accounts Receivable	140000
Inventory	200000
Land	200000
Buildings	400000
Equipment	100000
Patent	300000
Total value of assets (A)		1340000
Fair value of liability:
Bonds Payable	-220000
Current liability	-260000
Total value fo licability (B)		-480000
Total net fair value (C= A-B)		860000
90% of fair value (D=C*90%)		774000
Amount paid to buy (E)		550000
Capital reserve (D-E) i.e. gain on purchase		224000

Ques 3)

	Fair value	Book value	Adjustment
Fair value of assets:
Accounts Receivable	140000	150000	-10000
Inventory	200000	180000	20000
Land	200000	200000	0
Buildings	400000	450000	-50000
Equipment	100000	280000	-180000
Patent	300000	0	300000
Total value of assets (A)	1340000	1260000	80000
Liabilities:
Bonds Payable	-220000	-250000	30000
Current liability	-260000	-260000	0
Total gain			110000
Part of P Co.			99000
Part of Minority interest			11000

Ques 4)

Accounts Receivable	Dr	140000
Inventory	Dr	200000
Land	Dr	200000
Buildings	Dr	400000
Equipment	Dr	100000
Patent	Dr	300000
Acquisition Expense	Dr	15000
To Bonds payable	Cr		220000
To Current liability	Cr		260000
To cash	Cr		565000
To minority interest	Cr		86000
To capital reserve	Cr		224000