Question: Balance sheets for P Company and S Company on August

Balance sheets for P Company and S Company on August 1, 2011, are as follows:

Prepare a workpaper for a consolidated balance sheet for P Company and its subsidiary on August 1, 2011, taking into consideration the following:
1. P Company acquired 90% of the outstanding common stock of S Company on August 1, 2011, for a cash payment of $586,500.
2. Included in the Investment in Bonds account are $40,000 par value of S Company bonds payable that were purchased at par by P Company in 2002. The bonds pay interest on April 30 and October 31. S Company has appropriately accrued interest expense on August 1, 2011; PCompany, however, inadvertently failed to accrue interest income on the S Company bonds.
3. Included in P Company receivables is a $35,000 cash advance to S Company that was mailed on August 1, 2011. S Company had not yet received the advance at the time of the preparation of its August 1, 2011, balance sheet.
4. Assume that any excess of book value over the value implied by purchase price is due to overvalued plant andequipment.

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  • CreatedMarch 13, 2015
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