Princeton Products Corporation acquired 90 percent ownership of Stanford Company on October 20, 20X2, through an exchange
Question:
Princeton Products Corporation acquired 90 percent ownership of Stanford Company on October 20, 20X2, through an exchange of voting shares. Princeton Products issued 8,000 shares of its $10 par stock to acquire 27,000 shares of Stanford’s $5 par stock. The market value of shares issued by Princeton Products was $247,500. At that date, the fair value of the noncontrolling interest was $27,500. Trial balances of the two companies on December 31, 20X2, are as follows:
For 20X2, before acquisition, Stanford reported sales of $205,000, cost of goods sold of $126,000, depreciation of $16,000, and other expenses of $18,000. Stanford paid dividends of $20,000 in April and $10,000 in November 20X2. Princeton Products, which paid dividends of $40,000 in 20X2, uses the equity method in accounting for its investment in Stanford.
Required
a. Give all journal entries recorded by Princeton Products during 20X2 that relate to its investment in Stanford.
b. Give the worksheet consolidation entries needed on December 31, 20X2, to prepare consolidated financial statements.
c. Prepare a three-part consolidation worksheet as of December 31, 20X2.
Step by Step Answer:
Advanced Financial Accounting
ISBN: 9781260772135
13th Edition
Authors: Theodore Christensen, David Cottrell, Cassy Budd