On December 31, 20x7, PA. Inc. purchased 90 percent of S Company for 240,000 cash. The Balance Sheet of each corporation just prior to the acquisition is presented below. Additionally, book value and fair value for all of S' assets and liabilities are equal, with the exception of Property, plant and equipment, whose fair value is 94,000.

 Table 1. Balance sheet before acquisition

	P Company	S Company
ASSETS
Current assets
Cash	P 340,000	P 42,000
Accounts receivable (net)	120,000	90,000
Inventory	100,000	90,000
Total current assets	P 560,000	P 222,000
Noncurrent assets
Property, plant and equipment	530,000	84,000
TOTAL ASSETS	P 1,090,000	P 306,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Current liabilities
Accounts payable	P 140,000	P 60,000
Accruals	40,000	30,000
Total current liabilities	P 180,000	P 90,000
Noncurrent liabilities
Bonds payable	360,000
Total liabilities	P 540,000	P 90,000
Shareholders' equity
Common stock	P 200,000	P 110,000
Additional paid-in capital	40,000	16,000
Retained earnings	310,000	90,000
Total shareholders' equity	P 550,000	P 216,000
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	P 1,090,000	P 306,000

REQUIRED

Recording the purchase of S Company by P Company.

What is the implied fair value of S Company?

Calculate the amount of Goodwill implicit in the purchase.

What is the amount of non-controlling interest share in S Company at the date of acquisition?

What is the consolidated depreciation expense to be reflected in the consolidated income statement for 20x8 assuming a 10 year depreciation life for property, plant and equipment?

Prepare the necessary work paper adjusting entries on the date of purchase.

Prepare a consolidated Balance Sheet immediately after this acquisition on 12/31/20x7.

Answer rating: 100% (QA)

To record the purchase of S Company by P Company 1 P Companys journal entry Debit Investment in S Company Asset 240000 Credit Cash Asset 240000 2 S Companys journal entry Debit Cash Asset 240000 Credi... View the full answer