P Company acquired 27,000 shares of the common stock of S Company on 1/1/15, for $710,000 cash. The stockholders’ equity section of S Company’s balance sheet on that date was as follows:
Common Stock ($15 par) $450,000
APIC $60,000
RE $240,000
Total SE $750,000
On the date of acquisition, S Company owed P Company $10,000 on open account.
Present, in general journal form, the elimination (work paper) entries for the preparation of a consolidated balance sheet work paper on 1/1/15.
Complete the above by completing the following steps.
REQUIRED STEPS:
What is the “REAL” journal entry to record the stock acquisition?
Prepare the CAD
Prepare the Elimination/Workpaper Entry
Prepare the Intercompany Elimination/Workpaper Entry
Note: When a detailed review (valuation) of the existing assets and liabilities of S Company was performed there was two accounts that had differences between book value and fair value (see below).
Book Value Fair Value
Inventory $125,000 $100,000
Land $950,000 $990,000