On January 1, 2014, Palmer Company acquired a 90% interest in Stevens Company at a cost of

Question:

On January 1, 2014, 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:

On January 1, 2014, Palmer Company acquired a 90% interest

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 2014. Stevens Company purchased its bonds payable on the open market on January 10, 2014, for $150,000 and recognized a gain of $55,556.
Financial statement data for 2016 are presented here:

On January 1, 2014, Palmer Company acquired a 90% interest
On January 1, 2014, Palmer Company acquired a 90% interest

Required:
A. What method is Palmer using to account for its investment in Stevens? How can you tell?
B. 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, 2014, consolidated statements workpaper.
C. Prepare a consolidated financial statements workpaper for the year ended December 31, 2016.
D. Prepare in good form a schedule or t-account showing the calculation of the controlling and noncontrolling interest in consolidated net income for the year ended December 31, 2016.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Related Book For  book-img-for-question

Advanced Accounting

ISBN: 978-1119119364

6th edition

Authors: Debra Jeter, Paul Chaney

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