On January 1, 2014, Palmer Company acquired a 90% interest in Stevens Company at a cost of

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On January 1, 2014, Palmer Company acquired a 90% interest in Stevens Company at a cost of $1,000,000. At the purchase date, Stevens Company's stockholders' equity consisted of the following:

Common stock.................................$500,000

Retained earnings...............................190,000

An examination of Stevens Company's assets and liabilities revealed the following at the date of acquisition:

On January 1, 2014, Palmer Company acquired a 90% interest

Additional Information-Date of Acquisition
Stevens Company's equipment had an original life of 15 years and a remaining useful life of 10 years. All the inventory was sold in 2014. Stevens Company purchased its bonds payable on the open market on January 10, 2014, for $150,000 and recognized a gain of $55,556. Palmer Company uses the complete equity method to record its investment in Stevens Company. Financial statement data for 2016 are presented on the next page.

On January 1, 2014, Palmer Company acquired a 90% interest
On January 1, 2014, Palmer Company acquired a 90% interest

Required:
A. Prepare in general journal form the workpaper entry to allocate and depreciate the difference between book value and the value implied by the purchase price in the December 31, 2014, consolidated statements workpaper.
B. Prepare a consolidated financial statements workpaper for the year ended December 31, 2016.
C. Prepare in good form a schedule or t-account showing the calculation of the controlling interest in consolidated net income for the year ended December 31, 2016.
If you completed Problem 5-5 and Problem 5-12, a comparison of the consolidated balances in this problem with those you obtained in Problem 5-5 and Problem 5-12 will demonstrate that the method (cost, partial equity, or complete equity) used by the parent company to record its investment in a consolidated subsidiary has no effect on the consolidated balances.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Advanced Accounting

ISBN: 978-1119119364

6th edition

Authors: Debra Jeter, Paul Chaney

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