Parent Company acquired 90% of Son Incorporate on January 31, 20X2 in exchange for cash. The book value of Son's individual assets and liabilities approximated their acquisition- date fair values. On the date of acquisition, Son reported the following: Cash Inventory Plant Assets (net) Property Total Assets $ 350,000 100,000 Current Liabilities $ 120,000 320,000 Common Stock 500,000 $ 1,270,000 Retained Earnings Total Liabilities and Equity 100,000 1,050,000 $ 1,270,000 During the year Son Incorporate reported $310,000 in net income and declared $15,000 in dividends. Parent Company reported $520,000 in net income and declared $25,000 in dividends. Parent accounts for their investment using the equity method. Required: 1) What journal entry will Parent make on the date of acquisition to record the Investment in Son Incorporate? 2) If Parent were to prepare a consolidated balance sheet on the acquisition date (January 31, 20X2), what is the basic consolidation entry Parent would use in the consolidation worksheet? 3) What is Parent's balance in "Investment in Son Incorporate" prior to consolidation on December 31, 20X2? 4) What is the basic consolidation entry Parent would use in the consolidation worksheet on December 31, 20X2?
Parent Company acquired 90% of Son Incorporate on January 31, 20X2 in exchange for cash. The book value of Son's individual assets and liabilities approximated their acquisition- date fair values. On the date of acquisition, Son reported the following: Cash Inventory Plant Assets (net) Property Total Assets $ 350,000 100,000 Current Liabilities $ 120,000 320,000 Common Stock 500,000 $ 1,270,000 Retained Earnings Total Liabilities and Equity 100,000 1,050,000 $ 1,270,000 During the year Son Incorporate reported $310,000 in net income and declared $15,000 in dividends. Parent Company reported $520,000 in net income and declared $25,000 in dividends. Parent accounts for their investment using the equity method. Required: 1) What journal entry will Parent make on the date of acquisition to record the Investment in Son Incorporate? 2) If Parent were to prepare a consolidated balance sheet on the acquisition date (January 31, 20X2), what is the basic consolidation entry Parent would use in the consolidation worksheet? 3) What is Parent's balance in "Investment in Son Incorporate" prior to consolidation on December 31, 20X2? 4) What is the basic consolidation entry Parent would use in the consolidation worksheet on December 31, 20X2?
Auditing: A Risk Based-Approach (MindTap Course List)
11th Edition
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Chapter12: Auditing Long-lived Assets And Merger And Acquisition Activity
Section: Chapter Questions
Problem 37RQSC
Related questions
Question
Transcribed Image Text:Parent Company acquired 90% of Son Incorporate on January 31, 20X2 in exchange for cash. The book value of Son's individual assets and liabilities approximated their acquisition-
date fair values. On the date of acquisition, Son reported the following:
Cash
Inventory
Plant Assets
(net)
Property
Total Assets
$ 350,000
100,000
Current Liabilities
$ 120,000
320,000
Common Stock
500,000
$ 1,270,000
Retained Earnings
Total Liabilities and
Equity
100,000
1,050,000
$ 1,270,000
During the year Son Incorporate reported $310,000 in net income and declared $15,000 in dividends. Parent Company reported $520,000 in net income and declared $25,000 in
dividends. Parent accounts for their investment using the equity method.
Required:
1) What journal entry will Parent make on the date of acquisition to record the Investment in Son Incorporate?
2) If Parent were to prepare a consolidated balance sheet on the acquisition date (January 31, 20X2), what is the basic consolidation entry Parent would use in the consolidation
worksheet?
3) What is Parent's balance in "Investment in Son Incorporate" prior to consolidation on December 31, 20X2?
4) What is the basic consolidation entry Parent would use in the consolidation worksheet on December 31, 20X2?
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