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On January 1, 20X7 Quick Company acquired 100 percent of Sluggish Company's stock when Sluggish reported...

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Accounting

On January 1, 20X7 Quick Company acquired 100 percent ofSluggish Company's stock when Sluggish reported book values asfollows: assets of $1,200,000; liabilities of $450,000; commonstock of $350,000; and retained earnings of $400,000. At the dateof acquisition, the book values and the fair values of Sluggish'sassets and liabilities were equal. For 20X7, Sluggish reported netincome of $500,000, and paid dividends of $25,000.

Give the eliminating entry needed on December 31, 20X7, toprepare consolidated financial statements

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4.1 Ratings (462 Votes)

1.                                                 Jounral Entry dec 31 2007

                                             Profit and Loss from sluggish company A/c     500000

                                                           To Retained earning A/c                                      500000

                                     (Being profit of subsidiary company transferred)

2.                                                   Dividend Received A/c Dr                25000

                                                             To Cost of investment of sluggish A/c    25000

                                             (being dividend amount reduced from the cost of acquisition amt)
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