Question: On January 1 2011 Palmer Company acquired a 90 interest

On January 1, 2011, Palmer Company acquired a 90% interest in Stevens Company at a cost of $1,000,000. At the purchase date, Stevens Company’s stockholders’ equity consisted of the following:
Common stock......... $500,000
Retained earnings...... 190,000
An examination of Stevens Company’s assets and liabilities revealed the following at the date of acquisition:

Additional Information—Date of Acquisition
Stevens Company’s equipment had an original life of 15 years and a remaining useful life of
10 years. All the inventory was sold in 2011. Stevens Company purchased its bonds payable on
the open market on January 10, 2011, for $150,000 and recognized a gain of $55,556. Palmer
Company uses the complete equity method to record its investment in Stevens Company.
Financial statement data for 2013 are presented on the next page.

A. Prepare in general journal form the workpaper entry to allocate and depreciate the difference between book value and the value implied by the purchase price in the December 31, 2011, consolidated statements workpaper.
B. Prepare a consolidated financial statements workpaper for the year ended December 31, 2013.
C. Prepare in good form a schedule or t-account showing the calculation of the controlling interest in consolidated net income for the year ended December 31,2013.
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  • CreatedMarch 13, 2015
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