Prism Co acquired 80% of the stock of Sapphire Co for $300,000 on 1 January 20x7....

 

 

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Prism Co acquired 80% of the stock of Sapphire Co for $300,000 on 1 January 20x7. At acquisition date. Sapphire reported retained earnings of S150.000. The excess of Prism Cos acquisition cost over its share of Sapphire's book value was assigned to buildings and equipment that had a remaining life of ten years at acquisition date and deferred tax liability on the undervalued building and equipment. The purchase consideration paid by Prism Co was proportional to Prisms share of the fair value of Sapphire Co as an entity. Non-controlling interests are to be measured at its share of fair value of Sapphire Co as at acquisition date. The financial statements of the two companies for the year ended 31 December 20x9 are shown below. Investment in Sapphire Co was carried at cost. Statements of Financial Position As at 31 December 20x9 Prism Sapphire $ 480,000 (320,000) Sales Cost of goods sold Dividend income Depreciation expense Interest expense Tax and other expenses $1,000,000 (640,000) 16,000 (100,000) (72,000) (44.000) (10,000) (14,000) (76,000) $ 60,000 300.000 (20.000) $ 160,000 Profit retalned Retained earnings, 1 January Dividends declared 580,000 (40.000) $ 700,000 Retained earnings, 31 December $ 340.000 $ 420.000 270,000 150,000 $ 620.000 640,000 260,000 1,500,000 300,000 $3.320,000 Cash and receivables Inventory Land Buldings and equipment, cost Investment in Sapphire, cost. 200,000 Debits $1,040,000 $ 60.000 420.000 200,000 340,000 $1,000,000 1,220,000 Accumulated depreciation Payables Share capital Retained earnings 400,000 700.000 $3,320.000 ..... www*. Credits $1.040.000 On 1 January 20x9, Prism Co held inventory purchased from Sapphire Co during 20x8 for $15.000, which had been manufactured by Sapphire at a cost of S10,000. During 20x9, Sapphire sold goods costing $40,000 to Prism Co for $60,000. Prism sold the inventory on hand at the beginning of the year, but continued to hold 40% of its 20x9 purchases from Sapplhire on 31 December 20x9. Fax rate was-20 Required: 1. Prepare all necessary consolidation elimination and adjustment entries for the year ended 31 December 20x9. 2. Prepare the consolidation worksheets for the year ended 31 December 20x9. Prism Co acquired 80% of the stock of Sapphire Co for $300,000 on 1 January 20x7. At acquisition date. Sapphire reported retained earnings of S150.000. The excess of Prism Cos acquisition cost over its share of Sapphire's book value was assigned to buildings and equipment that had a remaining life of ten years at acquisition date and deferred tax liability on the undervalued building and equipment. The purchase consideration paid by Prism Co was proportional to Prisms share of the fair value of Sapphire Co as an entity. Non-controlling interests are to be measured at its share of fair value of Sapphire Co as at acquisition date. The financial statements of the two companies for the year ended 31 December 20x9 are shown below. Investment in Sapphire Co was carried at cost. Statements of Financial Position As at 31 December 20x9 Prism Sapphire $ 480,000 (320,000) Sales Cost of goods sold Dividend income Depreciation expense Interest expense Tax and other expenses $1,000,000 (640,000) 16,000 (100,000) (72,000) (44.000) (10,000) (14,000) (76,000) $ 60,000 300.000 (20.000) $ 160,000 Profit retalned Retained earnings, 1 January Dividends declared 580,000 (40.000) $ 700,000 Retained earnings, 31 December $ 340.000 $ 420.000 270,000 150,000 $ 620.000 640,000 260,000 1,500,000 300,000 $3.320,000 Cash and receivables Inventory Land Buldings and equipment, cost Investment in Sapphire, cost. 200,000 Debits $1,040,000 $ 60.000 420.000 200,000 340,000 $1,000,000 1,220,000 Accumulated depreciation Payables Share capital Retained earnings 400,000 700.000 $3,320.000 ..... www*. Credits $1.040.000 On 1 January 20x9, Prism Co held inventory purchased from Sapphire Co during 20x8 for $15.000, which had been manufactured by Sapphire at a cost of S10,000. During 20x9, Sapphire sold goods costing $40,000 to Prism Co for $60,000. Prism sold the inventory on hand at the beginning of the year, but continued to hold 40% of its 20x9 purchases from Sapplhire on 31 December 20x9. Fax rate was-20 Required: 1. Prepare all necessary consolidation elimination and adjustment entries for the year ended 31 December 20x9. 2. Prepare the consolidation worksheets for the year ended 31 December 20x9.

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