On December 31, 2012, Adam Corporation acquired all of the stock of Baker Company. The fair value of Adams' shares used in the exchange was $37,500,000. At the time of acquisition, the book value of Baker's shareholders' equity was $5,000,000, and the book value of Baker's building (25-year life) exceeded its fair value by $1,000,000. From the date of acquisition to December 31, 2018. Baker had cumulative net income of $1,300,000. For 2019. Baker reported net income of $300,000. Adams uses the complete equity method to account for its investment in Baker. There is no goodwill impairment loss for the period 2013 through 2018, but there is impairment loss of $100,000 in 2019. Baker declared no dividends during the period of 2013-2019. Required: Prepare the working paper eliminating entries necessary to consolidate the financial statements of Adams and Baker at December 31,2019.
On December 31, 2012, Adam Corporation acquired all of the stock of Baker Company. The fair value of Adams' shares used in the exchange was $37,500,000. At the time of acquisition, the book value of Baker's shareholders' equity was $5,000,000, and the book value of Baker's building (25-year life) exceeded its fair value by $1,000,000. From the date of acquisition to December 31, 2018. Baker had cumulative net income of $1,300,000. For 2019. Baker reported net income of $300,000. Adams uses the complete equity method to account for its investment in Baker. There is no goodwill impairment loss for the period 2013 through 2018, but there is impairment loss of $100,000 in 2019. Baker declared no dividends during the period of 2013-2019. Required: Prepare the working paper eliminating entries necessary to consolidate the financial statements of Adams and Baker at December 31,2019.
Chapter20: Corporations: Distributions In Complete Liquidation And An Overview Of Reorganizations
Section: Chapter Questions
Problem 15CE
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Transcribed Image Text:On December 31, 2012, Adam Corporation acquired all of the stock of Baker Company. The fair value of Adams' shares
used in the exchange was $37,500,000. At the time of acquisition, the book value of Baker's shareholders' equity was
$5,000,000, and the book value of Baker's building (25-year life) exceeded its fair value by $1,000,000. From the date of
acquisition to December 31, 2018. Baker had cumulative net income of $1,300,000. For 2019. Baker reported net income
of $300,000. Adams uses the complete equity method to account for its investment in Baker. There is no goodwill
impairment loss for the period 2013 through 2018, but there is impairment loss of $100,000 in 2019. Baker declared no
dividends during the period of 2013-2019.
Required:
Prepare the working paper eliminating entries necessary to consolidate the financial statements of Adams and Baker at
December 31,2019.
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