On January 1, 2023, Pantop Corporation acquired 85% of the outstanding common stock of Song...
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Accounting
On January 1, 2023, Pantop Corporation acquired 85% of the outstanding common stock of Song Company for $612,000. There was no control premium.
The following information about Song Company on January 1, 2023 was available:
Book value
Fair value
Cash
193,000
193,000
Inventory
40,000
39,500
Building
180,000
200,000
Total
413,000
432,500
Accounts Payable
3,000
3,000
Common Stock
140,000
Add. Paid-in Capital
150,000
Retained Earnings
120,000
Total
413,000
Pantop uses the complete equity method to account for its investment in Song. During 2023, Song had a net income of $72,000. The remaining useful life of the building was five years with no salvage value. Song uses straight line depreciation. Songs cost of goods sold (FIFO) was $50,000 in 2023. On December 23, 2023, Song declared and paid $48,000 cash dividend to its shareholders. Goodwill was unimpaired as of December 31, 2023.
Prepare journal entries for Pantop to record under the complete equity method of accounting the operating results of Song in 2023.
(ii) Prepare the working paper eliminating entries C, E, R, O and N (in journal entry format) for Pantop Corporation and subsidiary for the year ended December 31, 2023.
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