Phone Corporation acquired 70 percent of Smart Corporation’s common stock on December 31, 20X4, for $98,000. At that date, the fair value of the noncontrolling interest was $42,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: Item Phone Corporation Smart Corporation Cash $ 52,300 $ 39,000 Accounts Receivable 99,000 59,000 Inventory 136,000 92,000 Land 66,000 49,000 Buildings & Equipment 417,000 268,000 Less: Accumulated Depreciation (151,000) (73,000) Investment in Smart Corporation 98,000 Total Assets $ 717,300 $ 434,000 Accounts Payable $ 141,500 $ 27,000 Mortgage Payable 300,800 288,000 Common Stock 72,000 40,000 Retained Earnings 203,000 79,000 Total Liabilities & Stockholders’ Equity $ 717,300 $ 434,000 At the date of the business combination, the book values of Smart’s assets and liabilities approximated fair value except for inventory, which had a fair value of $98,000, and buildings and equipment, which had a fair value of $210,000. At December 31, 20X4, Phone reported accounts payable of $13,600 to Smart, which reported an equal amount in its accounts receivable. Required: Prepare the consolidation entry or entries needed to prepare a consolidated balance sheet immediately following the business combination.

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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Phone Corporation acquired 70 percent of Smart Corporation’s common stock on December 31, 20X4, for $98,000. At that date, the fair value of the noncontrolling interest was $42,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition:

Item	Phone Corporation	Smart Corporation
Cash	$ 52,300	$ 39,000
Accounts Receivable	99,000	59,000
Inventory	136,000	92,000
Land	66,000	49,000
Buildings & Equipment	417,000	268,000
Less: Accumulated Depreciation	(151,000)	(73,000)
Investment in Smart Corporation	98,000
Total Assets	$ 717,300	$ 434,000
Accounts Payable	$ 141,500	$ 27,000
Mortgage Payable	300,800	288,000
Common Stock	72,000	40,000
Retained Earnings	203,000	79,000
Total Liabilities & Stockholders’ Equity	$ 717,300	$ 434,000

At the date of the business combination, the book values of Smart’s assets and liabilities approximated fair value except for inventory, which had a fair value of $98,000, and buildings and equipment, which had a fair value of $210,000. At December 31, 20X4, Phone reported accounts payable of $13,600 to Smart, which reported an equal amount in its accounts receivable.

Required:

Prepare the consolidation entry or entries needed to prepare a consolidated balance sheet immediately following the business combination.

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