Pommu Corporation paid $78,000 for a 60% interest in Schtick Inc. on January 1, 2014, when Schtick's
Question:
Pommu Corporation paid $78,000 for a 60% interest in Schtick Inc. on January 1, 2014, when Schtick's Capital Stock was $80,000 and its Retained Earnings $20,000. The fair values of Schtick's identifiable assets and liabilities were the same as the recorded book values on the acquisition date. Trial balances at the end of the year on December 31, 2014 are given below:
Pommu Schtick
Cash $4,500 $20,000
Accounts Receivable 24,000 30,000
Inventory 100,000 70,000
Investment in Schtick 78,000
Cost of Goods Sold 71,500 50,000
Operating Expenses 22,000 37,000
Dividends 15,000 10,000
$315,000 $217,000
Liabilities $47,000 $27,000
Capital stock, $10 par value 100,000 80,000
Additional Paid-in Capital 11,000
Retained Earnings 31,000 20,000
Sales Revenue 120,000 90,000
Dividend Income 6,000
$315,000 $217,000
During 2014, Pommu made only two journal entries with respect to its investment in Schtick. On January 1, 2014, it debited the Investment in Schtick account for $78,000 and on November 1, 2014, it credited Dividend Income for $6,000.
Part 1: Prepare a consolidated income statement and a statement of retained earnings for Pommu and Subsidiary for the year ended December 31, 2014.
Part 2: Prepare a consolidated balance sheet for Pommu and Subsidiary as of December 31, 2014.
Survey of Accounting
ISBN: 978-0077862374
4th edition
Authors: Thomas Edmonds, Christopher, Philip Olds, Frances McNair,Bor