Balance sheets for P Company and S Company on August 1, 2014, are as follows:

 

		P Company			S Company
Cash		165500			106000
Receivables		366000			126000
Inventory		261000			108000
Investment in bonds		306000			0
Investment in S Company stock		586500			0
Plant and equiptmnet (net)		573000			320000
Land		200000			300000
Total		2458000			960000
Accounts Payable		174000			58000
Accrued expenses		32400			26000
Bonds Payable 8%		0			200000
Common Stock		1500000			460000
Other Contributed capital		260000			60000
Retained earnings		491600			156000
Total		2458000			960000

 

Required:

Prepare a workpaper for a consolidated balance sheet for P Company and its subsidiary on August 1, 2014, taking into consideration the following:

1. P Company acquired 90% of the outstanding common stock of S Company on August 1, 2014, for a cash payment of $590,900.

2. Included in the Investment in Bonds account are $40,300 par value of S Company bonds payable that were purchased at par by P Company in 2002. The bonds pay interest on April 30 and October 31. S Company has appropriately accrued interest expense on August 1, 2014; P Company, however, inadvertently failed to accrue interest income on the S Company bonds.

3. Included in P Company receivables is a $35,000 cash advance to S Company that was mailed on August 1, 2014. S Company had not yet received the advance at the time of the preparation of its August 1, 2014.

4. Assume that any excess of book value over the value implied by purchase price is due to overvalued plant and equipment.

Answer rating: 100% (QA)

Answer P COMPANY AND SUBSIDIARY Consolidated Balance Sheet Workpaper 01Aug14 P S Eliminations Non co... View the full answer