This problem is a continuation of the problem in Section 10.5 of the chapter. In the chapter,
Question:
This problem is a continuation of the problem in Section 10.5 of the chapter. In the chapter, the workpaper was prepared for the year of the acquisition. In this problem, the consolidated statements are prepared for the second year after acquisition. On January 1, 2024, P Company, a European based- company, purchased 80% of S Company for €200,000 (when the common stock account was 80,000, other contributed capital was 50,000, and retained earnings were 40,000). The trial balances at the end of 2025 are reported below. P Company acquired S Company because it wanted to expand its operations geographically. S Company is located in the United States and will be classified as a CGU. P Company elects to test for impairment on December 31 of each year. Because both P Company and S Company sell similar inventory, their inventory policies must conform for consolidation purposes. P Company uses average cost for inventories and S Company used FIFO. In addition, P Company uses the proportionate method to record noncontrolling interest and the complete equity method to record the investment in S Company. There were no goodwill impairment charges during the year.
Required:
1. Prepare the computation and allocation of difference schedule for the date of acquisition.
2. Prepare the worksheet eliminating entries needed for consolidation for 2025.
3. Complete the consolidated workpaper for the year ended December 31, 2025.
4. Show the computation of noncontrolling interest in equity for 2025.
Step by Step Answer:
Part 1 Purchase price and implied value Less Book value of equity acquired Common stock Other contributed capital Retained earnings Total book value Excess of implied over book value Increase to Land ...View the full answer
