Response to the following problem:
On June 30, 200X P paid $375,000 cash for 100% of the Common Stock of S Company. The transaction is an acquisition of wherein the acquired company is not dissolved. S Company is maintained as a separate subsidiary of P Company. It is still an entity, but in this case P Company owns all of it's stock.
Following information is shown prior to acquisition being recorded:
P Company
Assets Liabilities and Capital
Cash $580,000 Current Liabilities $90,000
Inventories 60,000 Common Stock $5PV 100,000
Plant Assets 340,000 Additional Paid in Capital 200,000
Retained Earnings 590,000
Total $980,000 Total $980,000
S Company
Assets Liabilities and Capital
Inventories $ 20,000 Current Liabilities $30,000
Other Assets 40,000 Long Term Liabilities 50,000
Plant Assets 140,000 Common Stock $10 PV 40,000
Additional Paid in Capital 20,000
Retained Earnings 60,000
Total $200,000 Total $200,000
Differences between identifiable net assets of S Company were:
Current Fair Value Book Value Difference
Inventories $50,000 $20,000 $30,000
Plant 250,000 140,000 110,000
A. Prepare the journal entries showing the purchase
B. Prepare a schedule showing the amount of goodwill from this purchase.
C Prepare a consolidation worksheet showing the eliminations.
D. Prepare a consolidated balance sheet AS OF June 30, 200X using the consolidation worksheet as a basis.