Question

On December 31, 20X6, Greenly Corporation and Lindy Company entered into a business combination in which Greenly acquired all of Lindy’s common stock for $935,000. At the date of combination, Lindy had common stock outstanding with a par value of $100,000, additional paidincapital of $400,000, and retained earnings of $175,000. The fair values and book values of all Lindy’s assets and liabilities were equal at the date of combination, except for the following:


The buildings had a remaining life of 20 years, and the equipment was expected to last another 10 years. In accounting for the business combination, Greenly decided to use push-down accounting on Lindy's books.
During 20X7, Lindy earned net income of $88,000 and paid a dividend of $50,000. All of the inventory on hand at the end of 20X6 was sold during 20X7. During 20X8, Lindy earned net income of $90,000 and paid a dividend of $50,000.

Required
a. Record the acquisition of Lindy's stock on Greenly's books on December 31, 20X6.
b. Record any entries that would be made on December 31, 20X6, on Lindy's books related to the business combination if push-down accounting is employed.
c. Present all elimination entries that would appear in the worksheet to prepare a consolidated balance sheet immediately after the combination.
d. Present all entries that Greenly would record during 20X7 related to its investment in Lindy if Greenly uses the equity method of accounting for its investment.
e. Present all elimination entries that would appear in the worksheet to prepare a full set of consolidated financial statements for the year 20X7.
f. Present all elimination entries that would appear in the worksheet to prepare a full set of consolidated financial statements for the year20X8.


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  • CreatedMay 23, 2014
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