On January 1^st. 2021, X Company paid $656,000 in cash to acquire 80% of the common shares of the Y Company.

Below are the balance sheets of the X Company and Y Company at December 31^st. 2020.

X…………………………………………………….y

Cash……………………………………………………………$748,000…………………………………………..$ 20,800

Accounts receivable…………………………………… 168,000………………………………………….. 52,800

Inventory…………………………………………………… 200,000…………………………………………. 138,400

Goodwill……………………………………………………….. 400,000…………………………………………. 0

Plant assets……………………………………………….. 1,028,000………………………………………….. 330,400

Patents……………………………………………………….. 208,000……………………………………………….52,800

TOTAL ASSETS………………………………………….$2,752,000………………………………………… 595,200

Current liabilities………………………………………… 328,000…………………………………………… 72,000

Long-term debt………………………………………….. 920,000……………………………………………. 132,000

Common shares………………………………………….. 712,000……………………………………………. 200,000

Retained earnings……………………………………….. 792,000……………………………………………..191,200

TOTAL LIABILITIES &OWNERS’ EQUITY…… ….$2,752,000……………………………………………595,200

Additional Information:-

1. The fair values of Y’s identifiable net assets on this date were as follows:-

Cash………………………………………………………$20,800

Accounts receivable………………………………. 44,000

Inventory………………………………………………. 178,000

Plant…………………………………………………… 392,000

Trademarks…………………………………………… 68,000

Patents………………………………………………….. 124,000

Current liabilities………………………………….. 72,000

Long-term debt……………………………………. 148,000

2. In addition to the above assets, Y owned a number of unique . internet domain names .

These can be sold separately for an estimated amount $108,000.

3. On January 1^st. 2021, X Company paid the following fees for assistance in completing the purchase:-

Accounting fees…………………………$30,000

Legal fees……………………………………. 20,000

Required:-

1. Complete the consolidated balance sheet at January 1^st. 2021(24 marks).
2. Assume that X is a private entity, using ASPE, and chooses to use the cost method to account for its investment in Y, prepare X’s separate-entity balance sheet on January 1^st,2021 (6 marks).
3. Prepare working paper eliminating entries at the date of acquisition(6 marks)

(CLEARLY SHOW ALL YOUR WORKING PAPERS. MARKS ARE ALLOCATED FOR WORKING PAPERS)

Answer rating: 100% (QA)

Consolidated Balance Sheet as of January 1st 2021 Assets Amount Cash 768800 Accounts receivable 212000 Inventory 378000 Goodwill 328000 Plant assets 1420400 Trademarks 68000 Patents 332000 Internet do... View the full answer