On January 1, 2022, ABC acquired 80% of XYZ Voting Shares for $200,000.

As of that date, XYZ reported in its balance sheet equity section of common stock outstanding of $75,000 and retained earnings of $150,000.

The fair value of the non-controlling interest was $50,000 at the acquisition date.

The excess paid by ABC related to XYZ equipment that had a fair value of $25,000 above book value and a remaining economic life of 8 years at the date of the business combination.

At the end of 2022, ABC reported net income of $40,000 and paid dividends of $20,000.

At the end of 2022, XYZ reported a net income of $50,000 and paid dividends of $20,000.

Required:

1) Please provide the journal entries recorded by ABC for 2020 on your books if you account for your investment in SXYZ using the equity method.

2) Provide the necessary consolidation entries as of December 31, 2022 to prepare the consolidated financial statements of ABC and subsidiaries.

Answer rating: 100% (QA)

1 JOURNAL ENTRY DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT Investment 200000 To Cash 200000 Be... View the full answer