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ADVANCED ACCOUNTING UNIT 2 POST PROBLEM SEPARATE SUBSIDIARY

On June 30, 200X P paid $375,000 cash for 100% of the Common Stock of S Company. The transaction is an acquisition of wherein the acquired company is not dissolved. S Company is maintained as a separate subsidiary of P Company. It is still an entity, but in this case P Company owns all of its stock.

Following information is shown prior to acquisition being recorded:

P Company

Assets Liabilities and Capital

Cash $580,000 Current Liabilities $90,000

Inventories 60,000 Common Stock $5PV 100,000

Plant Assets 340,000 Additional Paid in Capital 200,000 Retained Earnings 590,000

Total $980,000 Total $980,000

S Company

Assets Liabilities and Capital

Inventories $ 20,000 Current Liabilities $30,000

Other Assets 40,000 Long Term Liabilities 50,000

Plant Assets 140,000 Common Stock $10 PV 40,000 Additional Paid in Capital 20,000

Retained Earnings 60,000

Total $200,000 Total $200,000

Differences between identifiable net assets of S Company were:

Current Fair Value Book Value Difference

Inventories $50,000 $20,000 $30,000

Plant 250,000 140,000 110,000

A. Prepare the journal entries showing the purchase

B. Prepare a schedule showing the amount of goodwill from this purchase.

C Prepare a consolidation worksheet showing the eliminations.

D. Prepare a consolidated balance sheet AS OF June 30, 200X using the consolidation worksheet as a basis.