On January 1, 20x0, P Company purchased 80 percent of the outstanding shares of S Company by paying P650,000. On that date, S Company P300,000 capital
On January 1, 20x0, P Company purchased 80 percent of the outstanding shares of S Company by paying P650,000. On that date, S Company P300,000 capital
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 25E
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Question
What is the consolidated
A. 2,040,000 C. 2,399,375
B. 2,349,375 D. 2,375,975
Transcribed Image Text:On January 1, 20x0, P Company purchased 80 percent of the outstanding shares
of S Company by paying P650,000. On that date, S Company P300,000 capital
stock and P500,000 retained earnings. An undervalued asset attributable to
building amounting to P75,000 with a remaining life of 25 years. All other assets
and liabilities of S Company had book value approximated their fair market
value.
On January 1, 20x1, P's common stock and retained earnings amounted to
P1,000,000 and P800,000, respectively, while S Company's retained earnings is
P600,000.
|
The 20x1 net income and dividends using cost (or initial value) method that was
as follows;
Net Income
Dividends
P Company
P340,000
P100,000
S Company
P150,000
P50,000
On April 1, 20x1, S Company sold equipment with book value of P30,000 to P
Company for 60,000. The gain on the sale is included in the net income of S
Company indicated above. The equipment is expected to have to have a
remaining useful life of five years from the date of sale.
On September 30, 20x1, P Company sold machinery with a book value of
P40,000 to S Company for P75,000. The gain on the sale is also included in the
net income of P company indicated above. The machinery is expected to last for
ten (10) years from the date of sale.
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