Pitton Corporation acquired 100 percent of Squash Company on January 1, 2021, for $320,000. Following are selected account balances from Pitton and Squash Corporation as of December 31, 2021: 

Pitton Corp. Squash Corp. Item Debit Credit Debit Credit 

Cash & Receivables $185,000 $125,000 

Buildings & Equipment 649,000 366,000 

Patents 185,000 125,000 

Investment in Squash 335,000 

Cost of Goods Sold 375,000 157,000 Depreciation Expense 35,000 22,000 

Other Expenses 185,000 126,000 

Dividends Declared 26,000 12,000 

Accumulated Depreciation $205,000 $95,000 

Liabilities 500,000 223,000 

Common Stock 300,000 100,000 

Retained Earnings 269,000 180,000 Sales 674,000 335,000 

Income from Squash 27,000 $1,975,000 $1,975,000 $933,000 $933,000 

Additional Information: 

1. On January 1, 2021 the fair market value of Squash’s assets equaled their book value with the exception of Buildings & Equipment (with an estimated economic life of 8 years) which had a fair market value in excess of $24,000 more than book value. 

2. Pitton used the equity method in accounting for its investment in Squash. 

3. Detailed analysis of receivables and payables showed that Squash owed Pitton $7,500 on December 31, 2021.

Required:

a. Give all journal entries recorded by Pitton with regard to its investment in Squash during 2021.

b. Prepare Book Value calculation table. 

c. Give the basic consolidation entry. 

d. Prepare the excess Value (Differential) Calculations table. 

e. Give amortized excess value reclassification entry. 

f. Give excess value (differential) reclassification entry. 

g. Give accumulated depreciation consolidation entry. 

h. Give the entry to eliminate intercompany accounts 

Answer rating: 100% (QA)

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