Question

Purple Corporation owns 80 percent of Corn Corporation's common stock. It purchased the shares on January 1, 20X1, for $520,000. At the date of acquisition, the fair value of the noncontrolling interest was $130,000, and Corn reported common stock outstanding of $400,000 and retained earnings of $200,000. The differential is assigned to a trademark with a life of five years. Each year since acquisition, Corn has reported income from operations of $60,000 and paid dividends of $25,000.
Corn purchased 70 percent ownership of Bark Company on January 1, 20X3, for $406,000. At that date, the fair value of the noncontrolling interest was $174,000, and Bark reported common stock outstanding of $250,000 and retained earnings of $300,000. In 20X3, Bark reported net income of $30,000 and paid dividends of $20,000. The differential is assigned to buildings and equipment with an economic life of 10 years at the date of acquisition.

Required
a. Prepare the journal entries recorded by Corn for its investment in Bark during 20X3.
b. Prepare the journal entries recorded by Purple for its investment in Corn during 20X3.
c. Prepare the elimination entries related to Corn's investment in Bark and Purple's investment in Corn needed to prepare consolidated financial statements for Purple and its subsidiaries at December 31, 20X3.



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  • CreatedMay 23, 2014
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