Phone Corporation acquired 70 percent of Smart Corporation's common stock on December 31, 20X4, for $91,000. At that date, the fair value of the noncontrolling interest was $39,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: Item Cash Accounts Receivable Inventory Land Buildings & Equipment Less: Accumulated Depreciation Investment in Smart Corporation Total Assets Accounts Payable Mortgage Payable. Common Stock Retained Earnings Total Liabilities & Stockholders' Equity Phone Smart Corporation Corporation $ 60,300 95,000 146,000 $ 34,000 52,000 86,000 34,000 264,000 (79,000) 65,000 412,000 (166,000) 91,000 $ 703,300 $ 137,500 293,800 66,000 206,000 $ 391,000 $ 35,000 247,000 33,000 76,000 $ 703,300 $ 391,000 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 $92,000, and buildings and equipment, which had a fair value of $200,000. At December 31, 20X4, Phone reported accounts payable of $13,300 to Smart, which reported an equal amount in its accounts receivable. Required: a. Prepare the consolidation entry or entries needed to prepare a consolidated balance sheet immediately following the business combination. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
Phone Corporation acquired 70 percent of Smart Corporation's common stock on December 31, 20X4, for $91,000. At that date, the fair value of the noncontrolling interest was $39,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: Item Cash Accounts Receivable Inventory Land Buildings & Equipment Less: Accumulated Depreciation Investment in Smart Corporation Total Assets Accounts Payable Mortgage Payable. Common Stock Retained Earnings Total Liabilities & Stockholders' Equity Phone Smart Corporation Corporation $ 60,300 95,000 146,000 $ 34,000 52,000 86,000 34,000 264,000 (79,000) 65,000 412,000 (166,000) 91,000 $ 703,300 $ 137,500 293,800 66,000 206,000 $ 391,000 $ 35,000 247,000 33,000 76,000 $ 703,300 $ 391,000 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 $92,000, and buildings and equipment, which had a fair value of $200,000. At December 31, 20X4, Phone reported accounts payable of $13,300 to Smart, which reported an equal amount in its accounts receivable. Required: a. Prepare the consolidation entry or entries needed to prepare a consolidated balance sheet immediately following the business combination. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Phone Corporation acquired 70 percent of Smart Corporation's common stock on December 31, 20X4, for $91,000. At that date, the
fair value of the noncontrolling interest was $39,000. Data from the balance sheets of the two companies included the following
amounts as of the date of acquisition:
Item
Cash
Accounts Receivable
Inventory
Land
Buildings & Equipment
Less: Accumulated Depreciation
Investment in Smart Corporation
Total Assets
Accounts Payable
Mortgage Payable.
Common Stock
Retained Earnings
Total Liabilities & Stockholders' Equity
Phone
Smart
Corporation Corporation
$ 60,300 $ 34,000
95,000
146,000
65,000
412,000
(166,000)
91,000
$ 703,300
$ 137,500
293,800
66,000
206,000
$ 703,300
52,000
86,000
34,000
264,000
(79,000)
$ 391,000
$ 35,000
247,000
33,000
76,000
$ 391,000
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 $92,000, and buildings and equipment, which had a fair value of $200,000. At December 31, 20X4, Phone
reported accounts payable of $13,300 to Smart, which reported an equal amount in its accounts receivable.
Required:
a. Prepare the consolidation entry or entries needed to prepare a consolidated balance sheet immediately following the business
combination.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
Transcribed Image Text:b. Prepare a consolidated balance sheet worksheet.
Note: Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with
a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where
multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of
the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the
worksheet.
Assets
PHONE CORPORATION AND SUBSIDIARY
Consolidated Balance Sheet
December 31, 20X4
Phone
Smart
Corporation Corporation
Consolidation Entries
Credit
Debit
Consolidated
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