P Company paid $5,000,000 (cash) for an 80% interest in S Company on 7/1/07. The book values and fair values of S's assets and liabilities on the date of acquisition were as follows: BV FV Cash $400 $400 Accounts Receivable $800 $800 Inventories $1,200 $1,900 Other Current Assets $100 $400 Land $2,400 $800 Building (10 year life) $1,400 $1,000 Patent (10 year life) $1,300 $1,200 Total Assets $7,600 $6,500 Accounts Payable $400 $400 Accrued Liabilities $200 $100 B/P (10 year maturity) Common Stock Retained Earnings Total $1,000 $5,000 $1,000 $7,600 $1,200 The company earned income of $240,000 ($20,000 per month) in 2007 and paid total dividends of $200,000 on October 1, 2007. Required 1)C the goo from the acquisition 2) Compute the Equity method Income from Sub. for 2007. 3) Record the Equity method journal entries for 2007.

P Company paid $5,000,000 (cash) for an 80% interest in S Company on 7/1/07. The book values and fair values of S's assets and liabilities on the date of acquisition were as follows: BV FV Cash $400 $400 Accounts Receivable $800 $800 Inventories $1,200 $1,900 Other Current Assets $100 $400 Land $2,400 $800 Building (10 year life) $1,400 $1,000 Patent (10 year life) $1,300 $1,200 Total Assets $7,600 $6,500 Accounts Payable $400 $400 Accrued Liabilities $200 $100 B/P (10 year maturity) Common Stock Retained Earnings Total $1,000 $5,000 $1,000 $7,600 $1,200 The company earned income of $240,000 ($20,000 per month) in 2007 and paid total dividends of $200,000 on October 1, 2007. Required 1)C the goo from the acquisition 2) Compute the Equity method Income from Sub. for 2007. 3) Record the Equity method journal entries for 2007.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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