Question

Pool Company purchased 90% of the outstanding common stock of Spruce Company on December 31, 2011, for cash. At that time the balance sheet of Spruce Company was as follows:
Current assets............. $1,050,000
Plant and equipment........... 990,000
Land............. 170,000
Total assets............. $2,210,000
Liabilities............. $ 820,000
Common stock, $20 par value........ 900,000
Other contributed capital.......... 440,000
Retained earnings............. 150,000
Total ................. 2,310,000
Less treasury stock at cost, 5,000 shares... 100,000
Total equities............ $2,210,000

Required:
Prepare the elimination entry required for the preparation of a consolidated balance sheet workpaper on December 31, 2011, assuming:
(1) The purchase price of the stock was $1,400,000. Assume that any difference between the book value of net assets and the value implied by the purchase price relates to subsidiary land.
(2) The purchase price of the stock was $1,160,000. Assume that the subsidiary land has a fair value of $180,000, and the other assets and liabilities are fairly valued.



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  • CreatedMarch 13, 2015
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