Porter Company purchased an 90% interest in the capital stock of Salem Company
Question # 00003384
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Updated on: 11/10/2013 11:35 PM Due on: 11/27/2013
On January 1, 2011, Porter Company purchased an 90% interest in the capital stock of Salem Company for $850,000. | ||||||||||||
The fair value of the noncontrolling interest was proportionate to the consideration paid by the controlling interest. | ||||||||||||
At that time, Salem Company had capital stock of $550,000 and retained earnings of $80,000. | ||||||||||||
Differences between the fair value and the book value of the identifiable assets of Salem Company were as follows: | ||||||||||||
Under (Over) Valued | ||||||||||||
Equipment | 120,000 | |||||||||||
Land | 25,000 | |||||||||||
Inventory | 40,000 | |||||||||||
In-Process Research & Development | 40,000 | |||||||||||
Bonds payable | -10,000 | |||||||||||
The book values of all other assets and liabilities of Salem Company were equal to their fair values on January 1, 20011 | ||||||||||||
The inventory was sold in 2011 and the equipment has a 5-year remaining life as of January 1, 2011. | ||||||||||||
The bonds payable mature in 5 years from January 1, 2011 | ||||||||||||
At 12/31/13, Salem owes Porter $25000 | ||||||||||||
Required for the year ended December 31, 2013: | ||||||||||||
1. Prepare the analysis as of acquisition date including unamortized differential at 1/1/11. | ||||||||||||
2. Prepare the journal entries Porter recorded with respect to its investment in Porter for the year ended 12/31/13. | ||||||||||||
Use formulas in all calculations. | ||||||||||||
Clearly label each part in the spreadsheet tab below | ||||||||||||
Do problem on "Additional Question" below for 20 points. | ||||||||||||
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Rating:
5/
Solution: Porter Company