Acorn Corporation owns 80 percent of Beet Corporation's common stock. It purchased the shares on January 1, 20X1, for $640,000. At the date of acquisition, the fair value of the noncontrolling interest was $160,000, and Beet reported common stock outstanding of $360,000 and retained earnings of $180,000. The differential is assigned to a trademark with a life of five years. Each year since acquisition, Beet has reported income from operations of $68,000 and paid dividends of $20,000. Beet purchases 70 percent ownership of Corn Company on January 1, 20X3, for $427,000. At that date, the fair value of the noncontrolling interest was $183,000, and Corn reported common stock outstanding of $250,000 and retained earnings of $300,000. In 20X3, Corn reported net income of $42,000 and paid dividends of $20,000. The differential is assigned to buildings and equipment with an economic life of 10 years at the date of acquisition. Required: Prepare the journal entries recorded by Beet for its investment in Corn during 20X3. Prepare the journal entries recorded by Acorn for its investment in Beet during 20X3. Prepare the consolidation entries related to Beet's investment in Corn and Acorn's investment in Beet needed to prepare consolidated financial statements for Acorn and its subsidiaries at December 31, 20X3.
Acorn Corporation owns 80 percent of Beet Corporation's common stock. It purchased the shares on January 1, 20X1, for $640,000. At the date of acquisition, the fair value of the noncontrolling interest was $160,000, and Beet reported common stock outstanding of $360,000 and
Beet purchases 70 percent ownership of Corn Company on January 1, 20X3, for $427,000. At that date, the fair value of the noncontrolling interest was $183,000, and Corn reported common stock outstanding of $250,000 and retained earnings of $300,000. In 20X3, Corn reported net income of $42,000 and paid dividends of $20,000. The differential is assigned to buildings and equipment with an economic life of 10 years at the date of acquisition.
Required:
- Prepare the journal entries recorded by Beet for its investment in Corn during 20X3.
- Prepare the journal entries recorded by Acorn for its investment in Beet during 20X3.
- Prepare the consolidation entries related to Beet's investment in Corn and Acorn's investment in Beet needed to prepare consolidated financial statements for Acorn and its subsidiaries at December 31, 20X3.
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