Problem 1
On January 1, 2015, Parent Company acquired 70% of the common stock of Subsidiary Company for $420,000.
Subsidiary Company has the following balance sheet on January 1, 2015:
Subsidiary
Company
Accounts Receivable
82,000
Inventory
40,000
Land
60,000
Buildings
200,000
Accumulated depreciation
(50,000)
Equipment
100,000
Accumulated depreciation
(30,000)
Total assets
402,000
Accounts Payable
90,000
Bonds Payable
100,000
Common Stock ($1 par)
10,000
Other Contributed Capital
90,000
Retained Earnings
112,000
Total liabilities & equity
402,000
Appraisal values for identifiable assets and liabilities are as follows:
Accounts Receivable
82,000
Inventory (sold during 2015)
38,000
Land
150,000
Buildings (20 year life)
280,000
Equipment (5 year life)
100,000
Accounts Payable
90,000
Bonds Payable
100,000
Parent Company uses the cost method to account for its investment in Subsidiary Co.
Required:
1. Prepare the elimination entries necessary for the consolidated workpapers in 2017.
2. Prepare a consolidated financial statements workpapers for the year ended December 31, 2017.
