UNIT $4$ POST PROBLEM $1$

On December $31,200$X P Corporation paid $$300,000$ cash for $80\%$ of the

common stock of S Company which becomes a subsidiary. Following

information is shown prior to the acquisition being recorded:

P Company

Assets Liabilities and Equity

Cash $580,000$ Liabilities $90,000$

Inventories $60,000$

Plant $340,000$ Common Stock, $$5$pv $100,000$

Paid in Capital $200,000$

Retained Earnings $590,000$

Total $980,000$ Total $980,000$

S Company

Assets Liabilities and Equity

Inventories $20,000$ Liabilities $30,000$

Other assets $40,000$ Long Term Debt $50,000$

Plant $140,000$ Common Stock, $$10$pv $40,000$

Paid in Capital $20,000$

Retained Earnings $60,000$

Total $200,000$ Total $200,000$

S market values are:

Plant $$250,000$

Inventory $$50,000$

$1.$ Prepare the entries in journal format to record the acquisition

and post to the general edger accounts.

$2.$ Prepare a consolidation workpaper.

$3.$ Prepare consolidated balance sheet.