Advanced Accounting: P3-1 The two following separate cases show the financial position

Advanced Accounting: P3-1 The two following separate cases show the financial position

Advanced Accounting (Hoyle)

PROBLEM 3-1 Consolidated Workpaper: Two Cases

The two following separate cases show the financial position of a parent company and its subsidiary company on November 30, 2011, just after the parent had purchased 90% of the subsidiary's stock:

Case I Case II

P Company S Company P Company S Company

Current assets 880,000 260,000 780,000 280,000

Investment in S Company 190,000 190,000

Long-term assets 1,400,000 400,000 1,200,000 400,000

Other assets 90,000 40,000 70,000 70,000

Total 2,560,000 700,000 2,240,000 750,000

Current liabilities 640,000 270,000 700,000 260,000

Long-term liabilities 850,000 290,000 920,000 270,000

Common stock 600,000 180,000 600,000 180,000

Retained earnings 470,000 (40,000) 20,000 40,000

Total 2,560,000 700,000 2,240,000 750,000

Prepare a November 30, 2011, consolidated balance sheet workpaper for each of the foregoing cases.

In Case I, any difference between book value of equity and the value implied by the purchase price relates to subsidiary long-term assets.

In Case II, assume that any excess of book value over the value implied by purchase price is due to overvalued long-term assets.
Advanced Accounting: P3-1 The two following separate cases show the financial position
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