Question

On January 1, 2014, Pluto Company acquired all of Saturn Company’s common stock for $1,000,000 cash. On that date, Saturn had retained earnings of $200,000 and common stock of $600,000. The book values of Saturn’s assets and liabilities were equal to fair values except for the following:


Additional Information:
1. The equipment had an estimated remaining useful life of five years at acquisition.
2. Goodwill was not impaired at December 31, 2014, but was impaired by $25,000 at December 31, 2015.
3. Reported income for Pluto (excluding equity income from Saturn’s earnings) and Saturn follows:


Required:
1. Prepare the January 1, 2014, journal entry on Pluto’s books to record the acquisition of Saturn.
2. Prepare the elimination entries needed to prepare a consolidated balance sheet immediately after acquisition.
3. Calculate consolidated income for 2014 and2015.


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  • CreatedSeptember 10, 2014
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