Plant Advertising Corporation acquired 60 percent of Seed Manufacturing Company's shares on December 31, 20X1, at underlying book value of $180,000. At that date, the fair value of the noncontrolling interest was equal to 40 percent of the book value of Seed Manufacturing. Seed's balance sheet on January 1, 20X7, contained the following balances: Assets Cash Accounts Receivable Inventory Buildings and Equipment Less: Accumulated Depreciation Liabilities and Equities $ 80,000 Accounts Payable 100,000 Bonds Payable 160,000 Common Stock 700,000 (240,000) Additional Paid-In Capital Retained Earnings $ 800,000 Total Liabilities and Equities $ 60,000 240,000 100,000 150,000 250,000 $ 800,000 Total Assets On January 1, 20X7, Seed purchased 2,000 of its own $10 par value common shares from Nonaffiliated Corporation for $42 per share. Required: a. Compute the change in the book value of the parent's equity as a result of the repurchase of shares by Seed Manufacturing. b. Prepare the entry to be recorded on Plant Advertising's books to recognize the change in the book value of the shares it holds. c. Prepare the consolidation entry needed in preparing a consolidated balance sheet immediately following the purchase of shares by Seed.
Plant Advertising Corporation acquired 60 percent of Seed Manufacturing Company's shares on December 31, 20X1, at underlying book value of $180,000. At that date, the fair value of the noncontrolling interest was equal to 40 percent of the book value of Seed Manufacturing. Seed's balance sheet on January 1, 20X7, contained the following balances: Assets Cash Accounts Receivable Inventory Buildings and Equipment Less: Accumulated Depreciation Liabilities and Equities $ 80,000 Accounts Payable 100,000 Bonds Payable 160,000 Common Stock 700,000 (240,000) Additional Paid-In Capital Retained Earnings $ 800,000 Total Liabilities and Equities $ 60,000 240,000 100,000 150,000 250,000 $ 800,000 Total Assets On January 1, 20X7, Seed purchased 2,000 of its own $10 par value common shares from Nonaffiliated Corporation for $42 per share. Required: a. Compute the change in the book value of the parent's equity as a result of the repurchase of shares by Seed Manufacturing. b. Prepare the entry to be recorded on Plant Advertising's books to recognize the change in the book value of the shares it holds. c. Prepare the consolidation entry needed in preparing a consolidated balance sheet immediately following the purchase of shares by Seed.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter12: Intangibles
Section: Chapter Questions
Problem 18E
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Vishnu
Transcribed Image Text:Plant Advertising Corporation acquired 60 percent of Seed Manufacturing Company's shares on December 31, 20X1, at underlying
book value of $180,000. At that date, the fair value of the noncontrolling interest was equal to 40 percent of the book value of Seed
Manufacturing. Seed's balance sheet on January 1, 20X7, contained the following balances:
Assets
Cash
Accounts Receivable
Inventory
Buildings and Equipment
Less: Accumulated Depreciation
Liabilities and Equities
$ 80,000
Accounts Payable
100,000
Bonds Payable
160,000
Common Stock
700,000
(240,000)
Additional Paid-In Capital
Retained Earnings
$ 800,000
Total Liabilities and Equities
$ 60,000
240,000
100,000
150,000
250,000
$ 800,000
Total Assets
On January 1, 20X7, Seed purchased 2,000 of its own $10 par value common shares from Nonaffiliated Corporation for $42 per share.
Required:
a. Compute the change in the book value of the parent's equity as a result of the repurchase of shares by Seed Manufacturing.
b. Prepare the entry to be recorded on Plant Advertising's books to recognize the change in the book value of the shares it holds.
c. Prepare the consolidation entry needed in preparing a consolidated balance sheet immediately following the purchase of shares by
Seed.
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