Chapter 3, Problem 3.26P

a.

To determine

Introduction: Journal entries is a systematic method of recording transactions as and when they occur. It is a summary of transactions divided into the debit and credit items that are recorded chronologically. It is an act of keeping and recoding all the transactions occurring in the business.

The journal entry on P’s book in acquisition.

Explanation of Solution

Recording the initial investment in S’ books.

Particular	Amount   $\$$	Amount   $\$$
Investment in S Dr.	$270,000$
Cash Cr.		$270,000$

b.

To determine

Introduction: Consolidated balance sheets and worksheets are the tools that are used to calculate the retained earnings and the dividends produce by the subsidiaries towards its parent company.

The consolidate worksheet of the final values by the P’s book.

Explanation of Solution

Consolidated worksheet:

Book value
	NC $10\%$	+	P	=	Common stock	=	Retained earnings
Original book value	$30,000$		$270,000$		$200,000$		$100,000$

Balance sheet	P’s	S’s	Elimination DR	Elimination CR	consolidated
Cash	$55,000$	$20,000$			$75,000$
Amount received	$50,000$	$30,000$			$80,000$
Inventory	$100,000$	$60,000$			$160,000$
Investment in S	$270,000$			270,000	$0$
Land	225,000	100,000			325,000
Building and equipment	700,000	200,000		10000	890,000
Accumulated depreciation	(400,000)	(10,000)	10000		(400,000)
Total assets	$1,000,000$	$400,000$	$10,000$	$280,000$	$1,130,000$
Account payable	$75,000$	$25,000$			$100,000$
Bonds	$200,000$	$75,000$			$275,000$
Common stock	500000	500000	200000	200000	500000
Retain earning	225000	100000	100000		225000
NCI in NA of S				$30,000$	$30,000$
Total liabilities	$1,000,000$	$400,000$	$300,000$	$30,000$	$1,130,000$

c.

To determine

Concept Introduction:

Consolidated financial statements are financial statement maintained by entity with multiple subsidiary and division.

To Prepare:

The Consolidated balance sheet immediately following the acquisition.

Explanation of Solution

The Consolidated balance sheet immediately following the acquisition is as follows:

P and S
Consolidated Balance sheet
Particulars	Amount	Amount
Cash		$\$75,000$
Accounts Receivable		$\$80,000$
Inventory		$\$160,000$
Land		$\$325,000$
Building and Equipment	$\$890,000$
Less: Accumulated Depreciation	$\left(\$400,000\right)$	$\$490,000$
Total assets		$\$1,130,000$
Accounts Payable		$\$100,000$
Bonds Payable		$\$275,000$
Common Stock		$\$500,000$
Retained earnings		$\$225,000$
Non-controlling interest		$\$30,000$
Total liabilities and stock holders’ equity		$\$1,130,000$