Advanced Accounting: P3-29 Palm Company acquired 100 percent of Storm company'

Advanced Accounting
Palm Company acquired 100 percent of Storm company's voting stock on January 1, 2009, by issuing 10,000 shares of its $10 par value common stock (having a fair value of $14 per share). As of that date, Storm had stockholder's equity totaling $105,000. Land shown on Storm's acccounting records was undervalued by $10,000. Equipment (with a five year life) was undervalued by 5,000. A secret formula developed by Storm was appraised at $20,000 with an estimated life of 20 years.
Following are the separate financial statement for the two companies for the year ending December 31, 2013. Parentheses indicate a credit balance.

a. Explain how Palm derived the $66,000 balance in the Subsidiary Earning account
b. Prepare a worksheet to consolidate the financial information for these two companies.
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