1. On January 1, 2020, Pantop Corporation acquired 85% of the outstanding common stock of Sunny Company for $527,000. There was no control premium.

The following information about Sunny Company on January 1, 2020 was available:

	Book value	Fair value
Cash	193,000	193,000
Inventory	40,000	39,400
Building	180,000	200,000
Total	413,000	432,400
Accounts Payable	3,000	3,000
Common Stock	200,000
Add. Paid-in Capital	110,000
Retained Earnings	100,000
Total	413,000

Pantop uses the complete equity method to account for its investment in Sunny. During 2020, Sunny had a net income of $80,000. The remaining useful life of the building was five years with no salvage value. Sunny uses straight line depreciation. Sunny’s cost of goods sold (FIFO) was $70,000 in 2020. On December 23, 2020, Sunny declared and paid $48,000 cash dividend to its shareholders. Goodwill was unimpaired as of December 31, 2020.

(i)  Prepare journal entries for Pantop to record under the complete equity method of accounting the operating results of Sunny in 2020.

(ii) Prepare the working paper eliminating entries C, E, R, O and N (in journal entry format) for Pantop Corporation and subsidiary for the year ended December 31, 2020.

Answer rating: 100% (QA)

Net asset value Common stock 200000 APIC 110000 Retained earnings 100000 Net asset book value 410000 ... View the full answer