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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

The solution answers the question(s) below.

$2.19