In a cash transaction Root Company purchased 70 percent of
In a cash transaction, Root Company purchased 70 percent of the outstanding stock of Mandela Company for $593,600 cash on June 30, 2011. Immediately after the acquisition, the separate balance sheets of the companies appeared as follows.


Additional information: (a) Mandela’s other assets represent a long-term investment in Root’s long-term debt. The debt was purchased for an amount equal to Root’s carrying value of the debt. (b) Root owes Mandela $80,000 for services rendered.

REQUIRED
1. Prepare a work sheet for a consolidated balance sheet as of the acquisition date.
2. If you were reading Root’s consolidated balance sheet, what account would indicate that Root owned less than 100 percent of Mandela, and where would you find it on the balancesheet?
Membership TRY NOW
  • Access to 800,000+ Textbook Solutions
  • Ask any question from 24/7 available
    Tutors
  • Live Video Consultation with Tutors
  • 50,000+ Answers by Tutors
OR
Relevant Tutors available to help