Plain Corporation acquired a 75% interest in Swampy Company on January 1, 2016, for $2,000,000. The book value and fair value of the assets and liabilities of Swampy Company on that date were as follows: The property and equipment had a remaining life of 6 years on January 1, 2016, and the deferred charge was being amortized over a period of 5 years from that date. Common stock was $1,500,000 and retained earnings was $900,000 on January 1, 2016. Plain Company records its investment in Swampy Company using the cost method. Required: Prepare, in general journal form, the December 31, 2016, workpaper entries necessary to: Eliminate the investment account. Allocate and amortize the difference between implied and book value.
Plain Corporation acquired a 75% interest in Swampy Company on January 1, 2016, for $2,000,000. The book value and fair value of the assets and liabilities of Swampy Company on that date were as follows: The property and equipment had a remaining life of 6 years on January 1, 2016, and the deferred charge was being amortized over a period of 5 years from that date. Common stock was $1,500,000 and retained earnings was $900,000 on January 1, 2016. Plain Company records its investment in Swampy Company using the cost method. Required: Prepare, in general journal form, the December 31, 2016, workpaper entries necessary to: Eliminate the investment account. Allocate and amortize the difference between implied and book value.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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- Plain Corporation acquired a 75% interest in Swampy Company on January 1, 2016, for $2,000,000. The book value and fair value of the assets and liabilities of Swampy Company on that date were as follows:
The property and equipment had a remaining life of 6 years on January 1, 2016, and the deferred charge was being amortized over a period of 5 years from that date. Common stock was $1,500,000 and
Required:
Prepare, in general journal form, the December 31, 2016, workpaper entries necessary to:
- Eliminate the investment account.
- Allocate and amortize the difference between implied and book value.
Transcribed Image Text:Current Assets
Property & Equipment (net)
Land
Deferred Charge
Total Assets
Less Liabilities
Net Assets
Book Value
S
Fair Value
600,000
1,400,000
700,000
300,000
3,000,000
600,000
$ 2,400,000 $3,000,000
$
600,000
1,800,000
900,000
300,000
3,600,000
600,000
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