On December 31, 2020, Parent company (A) acquired 80% of Subsidiary (B) outstanding common stocks for SR 368,000, Subsidiary’s fair value of net asserts was SR 460,000. During 2021, subsidiary net income and dividends declared were 100,000 and 50,000 respectively. Begging balance for Accumulated depreciation of subsidiary‘s equipment amounted to SR 50,000. Parent uses non-pushdown accounting and equity method .Subsidiary‘s fair value of net assets were as follows Book Value Element Amount in SR Common Stock 150,000 Retained Earning 120,000 Total 270,000 Under –Or Over Valuation Inventory (10,000) 2 Months Land 50,000 No Useful Life Equipment 100,000 4 Years Total Under –Or Over Valuation 140,000 Good Will 50,000 No Useful Life Total Under –Or Over Valuation 490,000 Required: Pass journal entries to record the depreciation elimination entry if accumulated depreciation account based on book value of assets is 25,000.
On December 31, 2020, Parent company
(A) acquired 80% of Subsidiary
(B) outstanding common stocks for SR 368,000,
Subsidiary’s fair value of net asserts was SR 460,000. During 2021, subsidiary net income and dividends declared were 100,000 and 50,000 respectively. Begging balance for
|
Book Value Element |
Amount in SR |
||
|
Common Stock |
150,000 |
||
|
|
120,000 |
||
|
Total |
270,000 |
||
|
Under –Or Over Valuation |
|||
|
Inventory |
(10,000) |
2 Months |
|
|
Land |
50,000 |
No Useful Life |
|
|
Equipment |
100,000 |
4 Years |
|
|
Total Under –Or Over Valuation |
140,000 |
||
|
Good Will |
50,000 |
No Useful Life |
|
|
Total Under –Or Over Valuation |
490,000 |
Required:
Pass
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