Matthews Co. acquired all of the common stock of Jackson Co. on January 1, 2020. As of that date, Jackson had the following trial balance:
Matthews Co. acquired all of the common stock of Jackson Co. on January 1, 2020. As of that date, Jackson had the following
|
|
Debit |
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Credit |
||
|
Accounts payable |
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|
|
$ |
60,000 |
|
|
$ |
50,000 |
|
|
|
|
Additional paid-in capital |
|
|
|
|
60,000 |
|
Buildings (net) (20-year life) |
|
140,000 |
|
|
|
|
Cash and short-term investments |
|
70,000 |
|
|
|
|
Common stock |
|
|
|
|
300,000 |
|
Equipment (net) (8-year life) |
|
240,000 |
|
|
|
|
Intangible assets (indefinite life) |
|
110,000 |
|
|
|
|
Land |
|
90,000 |
|
|
|
|
Long-term liabilities (mature 12/31/19) |
|
|
|
|
180,000 |
|
|
|
|
|
|
120,000 |
|
Supplies |
|
20,000 |
|
|
|
|
Totals |
$ |
720,000 |
|
$ |
720,000 |
During 2020, Jackson reported net income of $96,000 while paying dividends of $12,000. During 2021, Jackson reported net income of $132,000 while paying dividends of $36,000.
Assume that Matthews Co. acquired the common stock of Jackson Co. for $588,000 in cash.
As of January 1, 2020, Jackson's land had a fair value of $102,000, its buildings were valued at $188,000, and its equipment was appraised at $216,000. 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.
Matthews decided to use the equity method for this investment.
Required:
Part 1: Prepare consolidation worksheet
Part 2: Prepare consolidation worksheet journal entries for December 31, 2021
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