Pop Corporation acquired 70 percent of Soda Company's voting common shares on January 1, 20X2, for $114,800. At that date, the noncontrolling interest had a fair value of $49,200 and Soda reported $70,000 of common stock outstanding and retained earnings of $25,000. The differential is assigned to buildings and equipment, which had a fair value $22,000 higher than book value and a remaining 10-year life, and to patents, which had a fair value $47,000 higher than book value and a remaining life of five years at the date of the business combination. Trial balances for the companies as of December 31, 20X3, are as follows:

On December 31, 20X2, Soda purchased inventory for $30,000 and sold it to Pop for $50,000. Pop resold $29,000 of the inventory (i.e., $29,000 of the $50,000 acquired from Soda) during 20X3 and had the remaining balance in inventory at December 31, 20X3. During 20X3, Soda sold inventory purchased for $54,000 to Pop for $90,000, and Pop resold all but $26,000 of its purchase. On March 10, 20X3, Pop sold inventory purchased for $16,000 to Soda for $32,000. Soda sold all but $8,000 of the inventory prior to December 31, 20X3. Assume Pop uses the fully adjusted equity method, that both companies use straight-line depreciation, and that no property, plant, and equipment has been purchased since the acquisition. Required: a. Prepare all consolidation entries needed to prepare a full set of consolidated

b. Prepare a three-part consolidation worksheet for 20X3. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)

 

Transcribed Image Text:

Pop Corporation Soda Company Pop Corporation Debit $ 17,400 167,000 82,000 360,000 117,100 188,000 25,000 Soda Company Debit $ 23,600 37,000 42,000 262,000 Item Credit Credit Cash & Accounts Receivable Inventory Land Buildings & Equipment Investment in Soda Company Cost of Goods Sold 81,800 20,000 7,200 17,000 Depreciation Expense Interest Expense Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Bond Premium 18,000 32,000 $ 142,000 94,400 234,180 $ 90,000 37,000 90,000 Common Stock Retained Earnings 122,000 129,900 1,600 70,000 62,000 Sales Other Income 262,000 140,000 11,600 10,420 Income from Soda Company $1,006,500 $1,006,500 $490,600 $490,600 Pop Corporation Soda Company Pop Corporation Debit $ 17,400 167,000 82,000 360,000 117,100 188,000 25,000 Soda Company Debit $ 23,600 37,000 42,000 262,000 Item Credit Credit Cash & Accounts Receivable Inventory Land Buildings & Equipment Investment in Soda Company Cost of Goods Sold 81,800 20,000 7,200 17,000 Depreciation Expense Interest Expense Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Bond Premium 18,000 32,000 $ 142,000 94,400 234,180 $ 90,000 37,000 90,000 Common Stock Retained Earnings 122,000 129,900 1,600 70,000 62,000 Sales Other Income 262,000 140,000 11,600 10,420 Income from Soda Company $1,006,500 $1,006,500 $490,600 $490,600

Answer rating: 100% (QA)

POP CORPORATION SUBSIDIARY Consolidated Financial Statement Worksheet Consolidated Entries Pop Corp ... View the full answer