On January 1, 2016, Palo Company acquires 80% of the outstanding common stock of Sheila Company for

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On January 1, 2016, Palo Company acquires 80% of the outstanding common stock of Sheila Company for $700,000.

On January 1, 2018, Sheila Company sells 25,000 shares of common stock to the public at $12 per share. Palo Company does not purchase any of these shares. No entry has been made by the parent. Sheila Company has the following stockholders' equity at the end of 2015 and 2017:

On January 1, 2016, Palo Company acquires 80% of the

On the January 1, 2016, acquisition date, Sheila Company's book values approximate fair values, except for a building that is undervalued by $80,000. The building has an estimated future life of 20 years. Any additional excess is attributed to goodwill.
Trial balances of the two companies as of December 31, 2018, are as follows:

On January 1, 2016, Palo Company acquires 80% of the

During 2018, Sheila Company sells $50,000 of merchandise to Palo Company at a price that includes a 20% gross profit. This is their first intercompany sale. $10,000 of the goods remains in Palo's ending inventory.
Required
Prepare the worksheet necessary to produce the consolidated financial statements of Palo Company and its subsidiary as of December 31, 2018. Include the determination and distribution of excess and income distribution schedules.

Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula                Ending Inventory Formula =...
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...
Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...
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Advanced Accounting

ISBN: 978-1305084858

12th edition

Authors: Paul M. Fischer, William J. Tayler, Rita H. Cheng

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