Pom Ltd. acquired a 90 percent interest in Sung Ltd. for $270,000 in January 1, 2014. Sung’s comparative balance sheet immediately before the acquisition is as follows:

 

ADDITIONAL INFORMATION

1. Sung’s net income and dividends during 2014 are $50,000 and $20,000, respectively.

2. Any excess other than plant assets are realized during 2014, while excess for plant assets is still held and depreciated using the straight-line method over 10 years.

REQUIRED

1. Prepare consolidation workpaper under the parent-company theory.

2. Prepare consolidation workpaper under the entity theory

Transcribed Image Text:

Cash Accounts receivable-net Inventories Other current assets Plant assets-net Total assets Liabilities Commoon stock, par 10 Preferred stock, $10, 1,000 shares, callable at $105, $100 par Retained earnings Total equities Book Value $210 90 120 80 350 $850 $100 600 150 $850 Pom Fair Value $210 100 100 80 400 $890 $100 Book Value $120 50 100 60 200 $530 $80 300 Sung 100 130 $610 Fair Value $120 60 120 50 220 $570 $80 Cash Accounts receivable-net Inventories Other current assets Plant assets-net Total assets Liabilities Commoon stock, par 10 Preferred stock, $10, 1,000 shares, callable at $105, $100 par Retained earnings Total equities Book Value $210 90 120 80 350 $850 $100 600 150 $850 Pom Fair Value $210 100 100 80 400 $890 $100 Book Value $120 50 100 60 200 $530 $80 300 Sung 100 130 $610 Fair Value $120 60 120 50 220 $570 $80

Answer rating: 100% (QA)

1 POM LTD AND SUBSIDIARY CONSOLIDATED BALANCE SHEET January 1 2014 Assets Cash 210 Accounts receivab... View the full answer