The elimination entries help accountants to present the account balances in a case where the parent and subsidiary companies need to be shown as a single economic firm. These entries appear on the consolidated statement worksheet. To record: The entries to be recorded in the purchase of the Paint, Inc. common stock and payment of acquisition costs.

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2. ABC Company acquired all of XYZ Corporation’s assets and liabilities on June 30, 20X1. XYZ reported assets with a book value of P1,000,000 and liabilities of P550,000. ABC noted that XYZ included the amount P70,000 for an obsolete inventory at the acquisition date that did not appear to have any value. ABC also determined that an old machine previously used by XYZ had a fair value of P150,000 but had not been recorded by XYZ. Except for machinery and equipment, all the other assets and liabilities of XYZ approximated their fair values. In recording the transfer of assets and liabilities in its books, ABC recorded goodwill of P420,000 and paid P1,050,000 to acquire XYZ’s net assets. If the book value of XYZ's machinery and equipment was P520,000, what was their fair value?

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Chapter 2, Problem 4.1E

To determine

Concept Introduction: The elimination entries help accountants to present the account balances in a case where the parent and subsidiary companies need to be shown as a single economic firm. These entries appear on the consolidated statement worksheet.

To record: The entries to be recorded in the purchase of the Paint, Inc. common stock and payment of acquisition costs.

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