Question

On January 1, 2010, Perez Company purchased 90% of the capital stock of Sanchez Company for $85,000. Sanchez Company had capital stock of $70,000 and retained earnings of $12,000 at that time. On December 31, 2014, the trial balances of the two companies were:


Any difference between book value and the value implied by the purchase price relates to goodwill.

Required:
A. What method is being used by Perez to account for its investment in Sanchez Company?
How can you tell?
B. Prepare a workpaper for the preparation of consolidated financial statements on12/31/14.


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  • CreatedMarch 13, 2015
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