Explanation Eliminating Subsidiary Equity purchased against the investment account: Particulars Debit ($) Credit ($) Common Stock ($10 par)Paid-in Capital in excess of parRetained EarningsInvestment in Saleen 10,00090,00060,000 160,000 Eliminating Entry to distribute excess amount to various accounts as per the D&D Schedule. It is a check done to ensure that Investment account has been eliminated. Worksheet Elimination Entry: Particulars Debit ($) Credit ($) InventoryLandBuildingEquipmentCopyrightsInvestment in SaleenRetained earnings- Palto 10,00040,000170,00020,00050,000 240,00050,000 Gain on acquisition is closed to the retained earnings of the parent company. Worksheet of Consolidated Balance Sheet Particulars Balance Sheet Elimination Adjustments Consolidated Balance Sheet($) Palto ($) Saleen ($) Debit ($) Credit ($) Cash 161,000 161,000 Accounts Receivable 65,000 20,000 85,000 Inventory 80,000 50,000 10,000 140,000 Investment in Shield Company 400,000 160,000 (1)240,000 (2) Land 100,000 40,000 40,000 180,00...

12th Edition

ISBN: 9781305084858

Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng

Publisher: Cengage Learning

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Question

Chapter 2, Problem 2.9.2P

To determine

Introduction:

Worksheet of Consolidated Balance Sheet shows elimination and adjustments of values to prepare consolidated balance sheet.

Elimination Entries eliminate the investment account against the accounts that are to be shown on the consolidated worksheet.

To prepare: Consolidated worksheet on acquisition date.

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Chapter 2 Solutions

Advanced Accounting

Ch. 2 - Prob. 1UTI Ch. 2 - Prob. 2UTI Ch. 2 - Prob. 3UTI Ch. 2 - Prob. 4UTI Ch. 2 - Prob. 5UTI Ch. 2 - Prob. 6UTI Ch. 2 - Santos Corporation is considering investing in...Ch. 2 - Prob. 2.1E Ch. 2 - Prob. 2.2E Ch. 2 - Prob. 3.1E

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Hamilton Companys balance sheet on January 1, 2019, was as follows: Korbel Company is considering purchasing Hamilton (a privately held company) and discovers the following about Hamilton: a. No allowance for doubtful accounts has been established. A 10,000 allowance is considered appropriate. b. Marketable securities are valued at cost. The current market value is 60,000. c. The LIFO inventory method is used. The FIFO inventory of 140,000 would be used if the company is acquired. d. Land, included in property, plant, and equipment, which is recorded at its cost of 50,000, is worth 120,000. The remaining property, plant, and equipment is worth 10% more than its depreciated cost. e. The company has an unrecorded trademark that is worth 70,000. f. The companys bonds are currently trading for 130,000. g. The pension liability is understated by 40,000. Required: 1. Compute the amount of goodwill if Korbel agrees to pay 500,000 cash for Hamilton. 2. Next Level What are the reasons that the book value of Hamiltons net identifiable assets differ from their market value? 3. Prepare the journal entry to record the acquisition on the books of Korbel assuming Hamilton is liquidated. 4. If Korbel agrees to pay only 400,000 cash, how much goodwill exists? 5. If Korbel pays only 400,000 cash, prepare the journal entry to record the acquisition on its books, assuming Hamilton is liquidated.

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