Exercise 5-4 Allocation of Cost and Workpaper Entries at Date of


Question Description:

35

Exercise 5-4 Allocation of Cost and Workpaper Entries at Date of Acquisition On January 1, 2012, Porter Company purchased an 80% interest in Salem Company for $260,000.  On this date, Salem Company had common stock of $207,000 and retained earnings of $130,500. An examination of Salem Company’s balance sheet revealed the following comparisons between book and fair values: Book Value Fair Value Inventory                    $    30,000       $    35,000 Other current assets          50,000             55,000 Equipment                       300,000           350,000 Land                                200,000           200,000 Required: A. Determine the amounts that should be allocated to Salem Company’s assets on the consolidated financial statements workpaper on January 1, 2012. B. Prepare the January 1, 2012, consolidated financial statements workpaper entries to eliminate the investment account and to allocate the difference between book value and the value implied by the purchase price. ewolff
posted a question · Feb 15, 2016 at 7:44pm

Answer

35