Mathews Co. acquired all the common stock of Stewart Co. on January 1, 2020. As of that date, Stewart had the following trial balance: Debit Credit accounts payable 60,000 accounts receivable 50,000 additional paid in capital 60,000 buildings, net (20 yr life) 140,000 cash and short-term investments 70,000 common stock 300,000 equipment, net (8 yr life) 240,000 intangible assets (infinite life) 110,000 land 90,000 long-term liabilities ( matures 12/31/22) 180,000 Retained earnings 1/1/20 120,000 supplies 20,000 totals 720,000 720,000 During 2020, Stewart reported net income of $112,000 while paying dividends of $14,000. Assume that Mathews Co. acquired the common stock of Stewart Co. for $638,000 in cash. As of January 1, 2020, Stewart's land had a fair value of $112,000, its buildings were valued at $192,000, and its equipment was appraised at $245,000. Any excess of consideration transferred over fair value of assets and liabilities acquired is due to an unamortized patent to be amortized over 10 years. Mathews decided to use the equity method for this investment. Required: Prepare consolidation entries for this business combination for the year 2020. For all consolidation entries, label them as S, A, I, D, or E. Do not prepare the worksheet.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Accounting

Mathews Co. acquired all the common stock of Stewart Co. on January 1, 2020. As of that date, Stewart had the following trial balance:

	Debit	Credit
accounts payable		60,000
accounts receivable	50,000
additional paid in capital		60,000
buildings, net (20 yr life)	140,000
cash and short-term investments	70,000
common stock		300,000
equipment, net (8 yr life)	240,000
intangible assets (infinite life)	110,000
land	90,000
long-term liabilities ( matures 12/31/22)		180,000
Retained earnings 1/1/20		120,000
supplies	20,000
totals	720,000	720,000

During 2020, Stewart reported net income of $112,000 while paying dividends of $14,000. Assume that Mathews Co. acquired the common stock of Stewart Co. for $638,000 in cash. As of January 1, 2020, Stewart's land had a fair value of $112,000, its buildings were valued at $192,000, and its equipment was appraised at $245,000. Any excess of consideration transferred over fair value of assets and liabilities acquired is due to an unamortized patent to be amortized over 10 years.

Mathews decided to use the equity method for this investment.

Required:

Prepare consolidation entries for this business combination for the year 2020. For all consolidation entries, label them as S, A, I, D, or E. Do not prepare the worksheet.

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