Advanced Accounting: P5-1 Phillips Company Purchased a 90% interest in Standards Corporation

Advanced Accounting

Problem 5-1

Phillips Company Purchased a 90% interest in Standards Corporation for $2,340,000 on January 1, 2010. Standards Corporation had $1,650,000 of common stock and $1,050,000 of retained earnings on that date. The following values were determined for Standards Corporation on the date of purchase:

Book Value Fair Value Difference

Inventory 240,000 300,000 60,000

Land 2,400,000 2,700,000 300,000

Equipment 1,620,000 1,800,000 180,000



Required

A. Prepare a computation and allocation schedule for the difference between the implied and book value in the consolidated statements work paper.

B. Prepare the January 1, 2010 work paper entries to eliminate the investment account and allocate the difference between implied and book value.
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