Task: Consolidation of Majority-Owned Subsidiary
On January 2, 20X8, B. N. Counter Copropration purchased 75 percent of Ticken Tie Company's outstandng common stock. In exchange for Ticken Tie's stock, B.N. Counter issued bonds payable with a par and fair value of $500,000 dirfectly to the selling stockholders of Ticken Tie. The two companies continured to operate as separate entities subsequent to the combination. Immediately prior to the combination, the book values and fair valus of th companies' assets and liabilities were as follows:
|
|
B.N. Counter |
Ticken Tie |
|
|
Book Value |
Fair Value |
Book Value |
|
Fair Value |
| Cash |
$12,000 |
$12,000 |
$9,000 |
|
$9,000 |
| Receivables |
41,000 |
39,000 |
31,000 |
|
30,000 |
| Allowance for Bad Debts |
(2000) |
|
(1,000) |
|
|
| Inventory |
86,000 |
89,000 |
68,000 |
|
75,000 |
| Land |
55,000 |
200,000 |
50,000 |
|
70,000 |
| Buildings and Equipment |
960,000 |
650,000 |
670,000 |
|
500,000 |
| Accumulated Depreciation |
(411000) |
|
(220,000) |
|
|
| Patent |
|
|
|
|
40,000 |
| Total Assets |
741,000 |
$990,000 |
$607,000 |
|
721,000 |
|
|
|
|
|
|
| Current Payables |
38,000 |
$38,000 |
$29,000 |
|
$29,000 |
| Bonds Payable |
200,000 |
210,00 |
100,000 |
|
90,000 |
| Common Stock |
300,000 |
|
200,000 |
|
|
| Additional Paid-In-Capital |
100,000 |
|
130,000 |
|
|
| Retained Earnings |
103,000 |
|
148,000 |
|
|
|
|
|
|
|
|
| Total Liabilities |
$741,000 |
|
$607,000 |
|
|
At the date of combination. Ticken Tie owed B.N. Counter $6,000 plus accrued interest of $500 on a short-term note.
Both companies have properly recorded these amounts.
Problem:
a) Record the business combination on the books of B.N. Counter Corporation
b) Present in general journal form all elimination entries needed in a workpaper to prepare a consolidated balance sheet immediately following the business combination on Jan. 2, 20X8.
c) Prepare and complete a consolidated balance sheet workpaper as of January 2, 20X8, immediately following the business combination.
d) Present a consolidated balance sheet for B.N. Co9unter and its subsidiary as of January 2, 20X8