Parrot Inc. acquired an 85% interest in Sparrow Corporation on January 2, 2014 for $42,500 cash when Sparrow had Capital Stock of $15,000 and Retained Earnings of $25,000. Sparrow's assets and liabilities had book values equal to their fair values except for inventory that was undervalued by $2,000. Balance sheets for Parrot and Sparrow on January 2, 2014, immediately after the business combination, are presented in the first two columns of the consolidated balance sheet working papers.

Required: Compute the following and then complete the attached consolidated balance sheet working papers.

a.) Compute implied FV

b.) Determine the excess of FV over BV acquired (if any)

c.) Allocate any excess of FV over BV acquired as appropriate

d.) Complete the attached Consolidated Balance Sheet immediately after the business combination on January 2, 2014.

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Eliminations Consolidate d Balance Parrot Sparrow Debit Credit Sheet ASSETS Cash 63,500 4,000 Accounts receivable 75,000 9,000 Inventories 39,000 10,000 Plant assets - net 170,000 35,000 Investment in Sparrow 42,500 Total Assets 390,000 58,000 EQUITIES Payables 120,000 18,000 Capital stock 100,000 15,000 Retained earnings 170,000 25,000 Noncontrolling interest Total Equities 390,000 58,000 Required: Complete the consolidation balance sheet working papers for Parrot and Sparrow at January 1, 2014. Eliminations Consolidate d Balance Parrot Sparrow Debit Credit Sheet ASSETS Cash 63,500 4,000 Accounts receivable 75,000 9,000 Inventories 39,000 10,000 Plant assets - net 170,000 35,000 Investment in Sparrow 42,500 Total Assets 390,000 58,000 EQUITIES Payables 120,000 18,000 Capital stock 100,000 15,000 Retained earnings 170,000 25,000 Noncontrolling interest Total Equities 390,000 58,000 Required: Complete the consolidation balance sheet working papers for Parrot and Sparrow at January 1, 2014.

Answer rating: 100% (QA)

Answer a Parrot Inc acquired an 85 interest in Sparrow Corporation Con... View the full answer