Pretzel Corporation acquired 100 percent of Stick Companys outstanding shares on January 1, 20X7. Balance sheet data
Question:
Pretzel Corporation acquired 100 percent of Stick Company’s outstanding shares on January 1, 20X7. Balance sheet data for the two companies immediately after the purchase follow:
Pretzel Corporation | Stick Company | |||||||
Cash | $ | 87,000 | $ | 31,000 | ||||
Accounts Receivable | 96,000 | 53,000 | ||||||
Inventory | 87,000 | 83,000 | ||||||
Buildings & Equipment | 419,000 | 289,000 | ||||||
Less: Accumulated Depreciation | (150,000 | ) | (89,000 | ) | ||||
Investment in Stick Company | 318,000 | |||||||
Investment in Stick Company Bonds | 58,000 | |||||||
Total Assets | $ | 915,000 | $ | 367,000 | ||||
Accounts Payable | $ | 58,000 | $ | 24,000 | ||||
Bonds Payable | 189,000 | 118,000 | ||||||
Common Stock | 296,000 | 155,000 | ||||||
Capital in Excess of Par | 145,000 | |||||||
Retained Earnings | 372,000 | (75,000 | ) | |||||
Total Liabilities & Equities | $ | 915,000 | $ | 367,000 | ||||
As indicated in the parent company balance sheet, Pretzel purchased $58,000 of Stick’s bonds from the subsidiary at par value immediately after it acquired the stock. An analysis of intercompany receivables and payables also indicates that the subsidiary owes the parent $11,000. On the date of combination, the book values and fair values of Stick’s assets and liabilities were the same.
Required:
a. Prepare all consolidation entries needed to prepare a consolidated balance sheet for January 1, 20X7. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) ( 1. Record the basic consolidation entry, 2. Record the excess value, 3. Record the entry to eliminate the intercompany accounts for Bonds Payable. 4.Record the entry to eliminate the remaining intercompany accounts. 5. Record the optional accumulated depreciation consolidation entry.)
b. Complete a consolidated balance sheet worksheet. (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.)
c. Prepare a consolidated balance sheet. (Amounts to be deducted should be entered with a minus sign.)
Fundamentals of Advanced Accounting
ISBN: 978-0077862237
6th edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik