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Advanced Purchase/consolidation Problem

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.

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 ...

Solution Summary

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