Pretzel Company purchased a 90% interest in Salt Corporation for $8,100,000 on January 1, 2023. Salt Corporation had $6,200,000 of common stock and $2,100,000 of retained earnings on that date. The following values were determined for Salt Corporation on the date of purchase: Inventory Land Equipment Book Value $220,000 6,200,000 1,920,000 Fair Value $280,000 6,520,000 1,900,000 Required: A. Prepare a computation and allocation schedule for the difference between the implied and book value at the date of acquisition. B. Prepare the January 1, 2023, workpaper entries to (1) eliminate the investment account and (2) allocate the difference between implied and book value.
Pretzel Company purchased a 90% interest in Salt Corporation for $8,100,000 on January 1, 2023. Salt Corporation had $6,200,000 of common stock and $2,100,000 of retained earnings on that date. The following values were determined for Salt Corporation on the date of purchase: Inventory Land Equipment Book Value $220,000 6,200,000 1,920,000 Fair Value $280,000 6,520,000 1,900,000 Required: A. Prepare a computation and allocation schedule for the difference between the implied and book value at the date of acquisition. B. Prepare the January 1, 2023, workpaper entries to (1) eliminate the investment account and (2) allocate the difference between implied and book value.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Pretzel Company purchased a 90% interest in Salt Corporation for $8,100,000 on January 1, 2023. Salt
Corporation had $6,200,000 of common stock and $2,100,000 of retained earnings on that date.
The following values were determined for Salt Corporation on the date of purchase:
Inventory
Land
Equipment
Book Value
$220,000
6,200,000
1,920,000
Fair Value
$280,000
6,520,000
1,900,000
Required:
A. Prepare a computation and allocation schedule for the difference between the implied and book value at
the date of acquisition.
B. Prepare the January 1, 2023, workpaper entries to (1) eliminate the investment account and (2) allocate
the difference between implied and book value.
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