Pisa Company acquired 75 percent of Siena Company on January 1, 20X3, for $712,500. The fair value of the noncontrolling interest was equal to 25 percent of book value. On the date of acquisition, Siena had common stock outstanding of $300,000 and a balance in retained earnings of $650,000. During 20X3, Siena purchased inventory for $35,000 and sold it to Pisa for $50,000. Of this amount, Pisa reported $20,000 in ending inventory in 20X3 and later sold it in 20X4. In 20X4, Pisa sold inventory it had purchased for $40,000 to Siena for $60,000. Siena sold $45,000 of this inventory in 20X4. Income and dividend information for Siena for 20X3 and 20X4 are as follows: Year Net Income Dividends 20X3 $ 150,000 $ 40,000 20X4 $ 200,000 $ 50,000 Pisa Company uses the fully adjusted equity method. Required: Present the worksheet consolidation entries necessary to prepare consolidated financial statements for 20X3. Present the worksheet consolidation entries necessary to prepare consolidated financial statements for 20X4.

Pisa Company acquired 75 percent of Siena Company on January 1, 20X3, for $712,500. The fair value of the noncontrolling interest was equal to 25 percent of book value. On the date of acquisition, Siena had common stock outstanding of $300,000 and a balance in retained earnings of $650,000. During 20X3, Siena purchased inventory for $35,000 and sold it to Pisa for $50,000. Of this amount, Pisa reported $20,000 in ending inventory in 20X3 and later sold it in 20X4. In 20X4, Pisa sold inventory it had purchased for $40,000 to Siena for $60,000. Siena sold $45,000 of this inventory in 20X4. Income and dividend information for Siena for 20X3 and 20X4 are as follows: Year Net Income Dividends 20X3 $ 150,000 $ 40,000 20X4 $ 200,000 $ 50,000 Pisa Company uses the fully adjusted equity method. Required: Present the worksheet consolidation entries necessary to prepare consolidated financial statements for 20X3. Present the worksheet consolidation entries necessary to prepare consolidated financial statements for 20X4.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter9: Acquisitions Of Property

Section: Chapter Questions

Problem 44P

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Year	Net Income	Dividends
20X3	$ 150,000	$ 40,000
20X4	$ 200,000	$ 50,000

Required:

Present the worksheet consolidation entries necessary to prepare consolidated financial statements for 20X3.
Present the worksheet consolidation entries necessary to prepare consolidated financial statements for 20X4.

Definition Definition Remaining net income of the company after the required dividends are paid to shareholders. This surplus money is usually invested back into the business to expand its business operations or launch a new product.

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