On January 1, 2015, Talbot Company acquires 90% of the outstanding stock of Lego Company for $810,000. At the time of the acquisition, Lego Company has the following stockholders’ equity:Common stock ($10 par). . . . . . . . . . . . . . . . . $300,000Paid-in capital in excess of par . . . . . . . . . . . . 150,000Retained earnings . . . . . . . . . . . . . . . . . . . . . . 200,000Total stockholders’ equity. . . . . . . . . . . . . . . $650,000 It is determined that Lego Company’s book values approximate fair values as of the purchase date. Any excess of cost over book value is attributed to goodwill. On July 1, 2015, Lego Company distributes a 10% stock dividend when the fair value of its common stock is $40 per share. A cash dividend of $0.50 per share is distributed on December 31, 2015. Lego Company’s net income for 2015 amounts to $108,000 and is earned evenly throughout the year.1. Prepare the entry required on Lego Company’s books to reflect the stock dividend distributed on July 1, 2015. Prepare the stockholders’ equity section of the Lego Company balance sheet as of December 31, 2015.2. Prepare the simple equity method entries that Talbot Company would make during 2015 to record its investment in Lego Company.3. Prepare the eliminations that would be made on the December 31, 2015, consolidated worksheet. (Assume the use of the simple equity method.) Prepare a determination and distribution of excess schedule to support the elimination.
On January 1, 2015, Talbot Company acquires 90% of the outstanding stock of Lego Company for $810,000. At the time of the acquisition, Lego Company has the following
Common stock ($10 par). . . . . . . . . . . . . . . . . $300,000
Paid-in capital in excess of par . . . . . . . . . . . . 150,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . 200,000
Total stockholders’ equity. . . . . . . . . . . . . . . $650,000
It is determined that Lego Company’s book values approximate fair values as of the purchase date. Any excess of cost over book value is attributed to
1. Prepare the entry required on Lego Company’s books to reflect the stock dividend distributed on July 1, 2015. Prepare the stockholders’ equity section of the Lego Company
2. Prepare the simple equity method entries that Talbot Company would make during 2015 to record its investment in Lego Company.
3. Prepare the eliminations that would be made on the December 31, 2015, consolidated worksheet. (Assume the use of the simple equity method.) Prepare a determination and distribution of excess schedule to support the elimination.
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