Boxwell Corporation purchased 60 percent of Conway Company on January 1, 20X7, f
ID: 2374834 • Letter: B
Question
Boxwell Corporation purchased 60 percent of Conway Company on January 1, 20X7, for a total of $277,500. Conway reported the following operating results for the next three years:
Year
Net Income
Dividends Paid
20X7
$45,000
$25,000
20X8
$55,000
$35,000
20X9
$30,000
$10,000
On January 1, 20X7, Conway has $250,000 of $5 par common stock outstanding and retained earnings of $150,000. At that date, Conway held land with a book value of $22,500 and a market value of $30,000 and equipment with a book value of $320,000 and a market value of $360,000. The remainder of the purchase price was attributable to patents, which had a remaining economic life of 10 years. All depreciable assets held by Conway on the date of acquisition had a remaining economic life of six years.
Analyze the data given and answer the following questions independently in a
four- to five-page Microsoft Word document.
Prepare the eliminating entries needed at December 31, 20X9, to prepare the consolidated income statement, retained earnings statement, and balance sheet
Year
Net Income
Dividends Paid
20X7
$45,000
$25,000
20X8
$55,000
$35,000
20X9
$30,000
$10,000
Explanation / Answer
Fair value 277 500 ========================================================================================================================= Fair value 185 000 ========================================================================================================================= total 462 500 ========================================================================================================================= Book value (400 000) ========================================================================================================================= Excess of fair value 62 500 ========================================================================================================================= Increase in value of land 7500 ========================================================================================================================= Increase in value of equipment 40 000 ========================================================================================================================= Increase in value of patenst 15 000 ======================================================================================================================================================================================== investment 277 500 ========================================================================================================================= cash 277 500 ========================================================================================================================= book value 40% 60% Common Retained raening ========================================================================================================================= Ending book value 160 000 240 000 50 000 15 000 =========================================================================================================================
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