P Corporation paid $420,000 for 80% of S Corporation’s $10 par common stock on D
ID: 2498671 • Letter: P
Question
P Corporation paid $420,000 for 80% of S Corporation’s $10 par common stock on
December 31, 2013, when S Corporation’s stockholders’ equity was made up of $300,000 of
Common Stock, $90,000 of Other Contributed Capital and $60,000 of Retained Earnings. S’s
identifiable assets and liabilities reflected their fair values on December 31, 2013, except for S's
inventory, which was undervalued by $60,000 and their land, which was undervalued by $25,000.
$10,000 of P’s Accounts Receivable is due from S. Balance sheets for P and S
P S
Cash $ 40,000 $ 30,000
Accounts Receivable (net) 30,000 45,000
Inventory 185,000 165,000
Land 480,000 240,000
Plant and Equipment (net) 45,000 120,000
Investment in S 420,000
Total Assets $ 1,200,000 $ 600,000
Accounts Payable $ 50,000 $ 20,000
Other Current Liabilities 120,000 130,000
Common Stock, $10 par 600,000 300,000
Other Contributed Capital 150,000 90,000
Retained Earnings 280,000 60,000
Total Liabilities and Equities $ 1,200,000 $ 600,000
Required:
Complete the consolidated balance sheet workpaper for P Corporation and S.
Explanation / Answer
Consolidated balancesheet Share holding pattern Paticulars No. of shares % Parent company 24000 80% Minority 6000 20% Total 30000 100% Apportionment of profit Retained earnings Parent 48,000 60000*0.8 Minority 12,000 60000*0.2 60,000 Minority interest Share capital 60,000 Other contributed capital 18,000 Retained earnings 12,000 revaluation reserve 5,000 total 95,000 Cost of control cost of investment 420,000 Value of investment: Parent share captial 240,000 Other contributed capital 72,000 Retained earnings 48,000 revaluation reserve 20,000 380,000 Goodwill 40,000 Current assets Cash 70,000 Accounts receivable 65,000 30000+45000-10000 Inventory 375,000 185000+165000+25000 Total current asset 510,000 Fixed assets: Land 720,000 Plant and Equipment 165,000 Total fixed assets 885,000 Goodwill 40,000 Total assets 1,435,000 Shareholders Equity Common stock 600,000 Other contributed capital 150,000 Retained earnings 280,000 Minority interest 95,000 Current liabilites Accounts payable 60,000 Other current liabilites 250,000 Total current liabilities 310,000 Total Liabilities and Equities 1,435,000
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