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On January 1, 2025, Porter Company purchased an 80% interest in Salem Company for $260,000. On this date, Salem Company had common stock of $207,000 and retained earnings of $130,500. An examination of Salem Company's balance sheet revealed the following comparisons bet- ween book and fair values:

On January 1, 2025, Porter Company purchased an 80% interest in Salem Company for $260,000. On this date, Salem Company had common stock of $207,000 and retained earnings of $130,500. An examination of Salem Company's balance sheet revealed the following comparisons bet- ween book and fair values:

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Exercises EXERCISE 5-4 test Allocation of Cost and Workpaper Entries at Date of Acquisition LO 2 On January 1, 2025, Porter Company purchased an 80% interest in Salem Company for $260,000. On this date, Salem Company had common stock of $207,000 and retained earnings of $130,500. An examination of Salem Company's balance sheet revealed the following comparisons bet- ween book and fair values: Inventory Other current assets Equipment Land Book Value $ 30,000 50,000 300,000 200,000 261 Fair Value $ 35,000 55,000 350,000 200,000 Required: A. Determine the amounts that should be allocated to Salem Company's assets on the consolidated financial statements workpaper on January 1, 2025. B. Prepare the January 1, 2025, consolidated financial statements workpaper entries to elimi- nate the investment account and to allocate the difference between book value and the value implied by the purchase price..
Transcribed Image Text:Exercises EXERCISE 5-4 test Allocation of Cost and Workpaper Entries at Date of Acquisition LO 2 On January 1, 2025, Porter Company purchased an 80% interest in Salem Company for $260,000. On this date, Salem Company had common stock of $207,000 and retained earnings of $130,500. An examination of Salem Company's balance sheet revealed the following comparisons bet- ween book and fair values: Inventory Other current assets Equipment Land Book Value $ 30,000 50,000 300,000 200,000 261 Fair Value $ 35,000 55,000 350,000 200,000 Required: A. Determine the amounts that should be allocated to Salem Company's assets on the consolidated financial statements workpaper on January 1, 2025. B. Prepare the January 1, 2025, consolidated financial statements workpaper entries to elimi- nate the investment account and to allocate the difference between book value and the value implied by the purchase price..
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