Penny Manufacturing Company acquired 75 percent of Saul Corporation stock at underlying book value. At the date of acquisition, the fair value of the noncontrolling interest was equal to 25 percent of Saul’s book value. The balance sheets of the two companies for January 1, 20X1, are as follows:On January 2, 20X1, Penny purchased an additional 2,500 shares of common stock directly from Saul for $150,000. Required:a. Prepare the consolidation entry needed to complete a consolidated balance sheet worksheet immediately following the issuance of additional shares to Penny. b. Prepare a consolidated balance sheet worksheet immediately following the issuance of additional shares to Penny. PENNY MANUFACTURING CORPORATIONBalance SheetJanuary 1, 20X1$ 235,50074,000108,000607,000(134,000) Retained Earnings246,000$1,136,500$ 130,500391,000187,00037,000391,000Accounts PayableBonds PayableCashAccounts ReceivableCommon StockInventoryBuildings & EquipmentLess: Accumulated DepreciationInvestment in Saul CorporationAdditional Paid-In CapitalTotal AssetsTotal Liabilities & Equities$1,136,500SAUL CORPORATIONBalance SheetJanuary 1, 20X1$ 75,000114,000188,000607,000(226,000) Retained Earnings$ 758,000 Total Liabilities & EquitiesAccounts PayableBonds PayableCommon Stock ($10 par)Additional Paid-In CapitalCash$139,000291,000100,00037,000191,000Accounts ReceivableInventoryBuildings & EquipmentLess: Accumulated DepreciationTotal Assets$758,000

The question is based on the concept of Financial Accounting.

Answered: Penny Manufacturing Company acquired 75…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Penny Manufacturing Company acquired 75 percent of Saul Corporation stock at underlying book value. At the date of acquisition, the fair value of the noncontrolling interest was equal to 25 percent of Saul’s book value. The balance sheets of the two companies for January 1, 20X1, are as follows:

On January 2, 20X1, Penny purchased an additional 2,500 shares of common stock directly from Saul for $150,000.

Required:
a. Prepare the consolidation entry needed to complete a consolidated balance sheet worksheet immediately following the issuance of additional shares to Penny.

b. Prepare a consolidated balance sheet worksheet immediately following the issuance of additional shares to Penny.

PENNY MANUFACTURING CORPORATION
Balance Sheet
January 1, 20X1
$ 235,500
74,000
108,000
607,000
(134,000) Retained Earnings
246,000
$1,136,500
$ 130,500
391,000
187,000
37,000
391,000
Accounts Payable
Bonds Payable
Cash
Accounts Receivable
Common Stock
Inventory
Buildings & Equipment
Less: Accumulated Depreciation
Investment in Saul Corporation
Additional Paid-In Capital
Total Assets
Total Liabilities & Equities
$1,136,500
SAUL CORPORATION
Balance Sheet
January 1, 20X1
$ 75,000
114,000
188,000
607,000
(226,000) Retained Earnings
$ 758,000 Total Liabilities & Equities
Accounts Payable
Bonds Payable
Common Stock ($10 par)
Additional Paid-In Capital
Cash
$139,000
291,000
100,000
37,000
191,000
Accounts Receivable
Inventory
Buildings & Equipment
Less: Accumulated Depreciation
Total Assets
$758,000

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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