January 1, 2019. Pueblo Corporation purchased a 75% interest in Sanchez Company for $900,000. A summary of
Question:
January 1, 2019. Pueblo Corporation purchased a 75% interest in Sanchez Company for $900,000. A summary of Sanchez Company's balance sheet at date of purchase follows Book Value Fair Value Equipment $720,000 Accumulated depreciation (240,000) Equipment (net) 480,000 S660,000 Other assets 450,000 Liabilities S255,000 Common stock 300.000 Retained carning 375.000 5930,000 The equipment had an original life of 15 years and remaining tuseful life of 10 years During 2019 Pueblo Corporation reported income of $237,000 and paid dividends of $150,000. Sanchez Company reported net income of $123,000 and paid dividends of S120,000 Pueblo uses the complete equity method to account for its investment in Sanchez
Required:
A. Prepare the elimination entries for the consolidated financial statements work paper on December 31, 2019. Accumulated depreciation is presented on a separate row in the work puper and in the consolidated financial statements.
B. Assume that Sanchez Company disposed of all its equipment on January 1, 2021. for $450,000
1. What amount of gain (loss) will Sanchez Company report?
2. What is the consolidated gain (less)? Chapter 5 Allocation and Depreciation of Differences Between implied and Book Values
3. Prepare the workpaper entry necessary to allocate the amount of the difference between book value and the value implied by the purchase price that was originally allocated to the equipment that has now been sold to outsiders.
4. What workpoper entry will be necessary to allocate this difference between book value and the value implied by the purchase price in future years?