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Solution to Extra Credit Problem Exam 1 Summer I 2009

Solution to Extra Credit Problem Exam 1 Summer I 2009 -...

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Accounting 401 Solution to Extra Credit Problem – Exam 1 Summer I 2009 Solution 1 – Assuming Purchase Method Consolidated Elimination Entries in General Journal Form: Equity in Subsidiary Earnings 1,475,000 Investment in Santo 1,475,000 Capital stock – Santo 6,000,000 Retained earnings – Santo 4,000,000 Investment in Santo 8,000,000 Noncontrolling interest 2,000,000 Inventory – Santo 2,000,000 Plant assets, net - Santo 8,500,000 Patents – Santo 500,000 Goodwill 2,000,000 Investment in Santo 12,000,000 Long-term liabilities 1,000,000 Note: We know that the purchase cost was $20,000,000. If $8,000,000 is attributed to the stockholders’ equity, then $12,000,000 must go against the fair value differences. Cost of goods sold 1,500,000 Depreciation expense 1,000,000 Amortization expense 125,000 Long term liabilities 100,000 Inventory 1,500,000 Plant assets, net 1,000,000 Patents 125,000 Interest expense 100,000 Noncontrolling interest in net income of Santo 1,000,000
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Noncontrolling interest 1,000,000 Consolidated Income Statement Sales $43,200,000 Cost of goods sold 23,500,000 Depreciation expense 6,200,000 Interest and other expenses 6,425,000 Noncontrolling interest in Santo net income 1,000,000 Total expenses 37,125,000
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