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Unformatted text preview: E5-13: Consolidation after One Year of OwnershipConsolidation after One Year of OwnershipPioneer Corporation purchased 80 percent of Lowe Corporation’s stock on January 1, 20X2. At that date Lowe reported retained earnings of $80,000 and had $120,000 of stock outstanding. The fair value of its buildings was $32,000 more than the book value.Pioneer paid $190,000 to acquire the Lowe shares. At that date, the noncontrolling interest had a fair value of $47,500. The remaining economic life for all Lowe’s depreciable assets was eight years on the date of combination. The amount of the differential assigned to goodwill is not impaired. Lowe reported net income of $40,000 in 20X2 and declared no dividends.Requireda.Give the eliminating entries needed to prepare a consolidated balance sheet immediately after Pioneer purchased Lowe stock.AccountDebitCreditCommon Stock — Lowe Corporation120,000 Retained Earnings, January 180,000 Differential30,000 Investment in Lowe Corporation Stock190,000Non-controlling InterestEliminate investment balance40,000AccountDebitCreditBuildings and Equipment25,600 Goodwill4,400 Differential30,000b.Give all eliminating entries needed to prepare a full set of consolidated financial statements for 20X2.AccountDebitCreditIncome from Subsidiary28,800 Investment in Lowe Corporation Stock28,800Reported net income of Lowe$40,000 Proportion of stock acquiredx .80Income before amortizing differential$32,000 Amortization of differential assigned tobuildings and equipment ($25,600 / 8)(3,200)Income from subsidiary for 20X2$28,800P5-32: Consolidation Workpaper at End of First Year of OwnershipConsolidation Workpaper at End of First Year of OwnershipPower Corporation acquired 75 percent of Best Company’s ownership on January 1, 20X8, for $96,000. At that date, the fair value of the noncontrolling interest was 1, 20X8, for $96,000....
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This note was uploaded on 04/17/2011 for the course ACCOUNTING 490 taught by Professor Santos during the Spring '11 term at University of Phoenix.
- Spring '11