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    Advanced Purchase/consolidation Problem

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    P acquired 100% of S's outstanding common stock on 1/1/06 for $400,000. Selected information for S as of 1/1/06 follows:

    Capital stock $ 50,000
    Retained earnings 250,000

    Book Current
    Value Value
    Inventory 60,000 50,000
    Land 170,000 200,000
    Bldgs/equip440,000(a) 500,000

    (a)Net of accum depr of $300,000.
    Assume P elected to use non-push-down accounting.

    a.Prepare the entry to record the combination.
    b.Prepare an analysis of the investment account by components.
    c.Prepare all consolidation entries as of 1/1/06.

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    Solution Preview

    (a) Non-push-down accounting means that we don't touch subsidiary's books and make adjustments to the fair value and record Goodwill.

    Cash 400,000
    Purchase ...

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