1. On January 1, 2020. Pilsner Company acquired a 90% interest in Smalley Company for...
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Accounting
1. On January 1, 2020. Pilsner Company acquired a 90% interest in Smalley Company for $3,600,000. On that date,Smalley Company had common stock of $800,000 and retained earnings of $2,800,000. The book values of assets and liabilities were equal to fair values except for the following:
Book Value
Fair Value
Inventory
$50,000
$56,000
Supplies
$8,000
$6,000
Salaries payable
$3,500
$4,100
Equipment
$540,000
$620,000
Land
$300,000
$460,000
The inventory was sold in 2020. The equipment had an estimated remaining useful life of 8 years. Pilsner Company uses the cost method to record its investment in Smalley Company
Required:
Prepare all the workpaper entry to allocate, amortize, and depreciate the difference between implied and book value on:
A) 1/1 2020,
B) 12312020
C) 12/31/2021
2. On January 1, 2020. Porter Company purchased an 80% interest in the capital stock of Shilo Company for $3,400,000. At that time. Shilo Company had common stock of $2,200,000 and retained earnings of $620,000. Implied value of Shilo was $1,430,000 more than its book value. The book values of all assets and liabilities of Shilo company were equal to their fair values on January 1, 2020 except land. Porter Company uses the cost method to record its investment in Shile Company. Selected account balances of the two companies are given as below.
Required: Indicate the correct amounts of the selected accounts that should appear in the consolidated financial statements. Account Balances As of December 31, 2021 Porter Shilo Consolidated Company Company Amount Sales 4.400.000 1.800.000 240.000 Dividends Declared investment in Shil Company 360.000 3.400,000 1.000.000 4.000.000 Land 1.200.000 2.200.000 Common Stock Account Balances as of December 31, 2021
Peter Company
Shilo Company
Consolidated Amount
Sales
4,400,000
1,800,000
Dividends Declared
360,000
240,000
Investment in Shilo Company
3,400,000
0
Land
1,000,000
1,280,000
Common Stock
4,000,000
2,200,000
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