P 4-2 Workpapers and financial statements in year of acquisition Pop Corporation acquired 70 percent of the outstanding voting stock of Son Corporation for $182,000 cash on January 1, 2016, when Son’s stockholders’ equity was $260,000. All the assets and liabilities of Son were stated at fair values (equal to book values) when Pop acquired its 70 percent interest. Financial statements of the two corporations at and for the year ended December 31, 2016, are summarized as follows (in thousands): Pop Son Combined Income and Retained Earnings Statements for the Year Ended December 31 Sales $1,240 $400 Income from Son 42 — Cost of goods sold (800) (260) Operating expenses (308) (80) Net income 174 60 Add: Retained earnings January 1 260 44 Deduct: Dividends (120) (40) Retained earnings December 31 $ 314 $ 64 Balance Sheet at December 31 Cash $ 182 $ 60 Receivables—net 240 120 Inventories 96 80 Plant and equipment—net 480 140 Investment in Son 196 — Total assets $1,194 $400 Accounts payable $ 120 $ 72 Other liabilities 80 48 Capital stock, $10 par 600 200 Other paid-in capital 80 16 Retained earnings 314 64 Total equities $1,194 $400 Required Prepare consolidation workpapers for Pop Corporation and Subsidiary for 2016. Prepare a consolidated income statement and a consolidated balance sheet for Pop Corporation and Subsidiary.
P 4-2 Workpapers and financial statements in year of acquisition
-
Pop Corporation acquired 70 percent of the outstanding voting stock of Son Corporation for $182,000 cash on January 1, 2016, when Son’s
stockholders’ equity was $260,000. All the assets and liabilities of Son were stated at fair values (equal to book values) when Pop acquired its 70 percent interest.Financial statements of the two corporations at and for the year ended December 31, 2016, are summarized as follows (in thousands):
Pop
Son
Combined Income and
Retained Earnings Statements for the Year Ended December 31Sales
$1,240
$400
Income from Son
42
—
Cost of goods sold
(800)
(260)
Operating expenses
(308)
(80)
Net income
174
60
Add: Retained earnings January 1
260
44
Deduct: Dividends
(120)
(40)
Retained earnings December 31
$ 314
$ 64
Balance Sheet at December 31Cash
$ 182
$ 60
Receivables—net
240
120
Inventories
96
80
Plant and equipment—net
480
140
Investment in Son
196
—
Total assets
$1,194
$400
Accounts payable
$ 120
$ 72
Other liabilities
80
48
Capital stock, $10 par
600
200
Other paid-in capital
80
16
Retained earnings
314
64
Total equities
$1,194
$400
Required
-
Prepare consolidation workpapers for Pop Corporation and Subsidiary for 2016.
-
Prepare a consolidated income statement and a consolidated balance sheet for Pop Corporation and Subsidiary.
Trending now
This is a popular solution!
Step by step
Solved in 7 steps with 7 images
