On January 1, 20X1, Parent Company Purchased 85% of the Common

question 10

Essay

On January 1, 20X1, Parent Company purchased 85% of the common stock, 8,500 shares, of Subsidiary Company for $317,500. On this date, Subsidiary had common stock, other paid-in capital, and retained earnings of $50,000, $100,000, and $200,000 respectively. Any excess of cost over book value is due to goodwill.
On January 1, 20X2, Subsidiary purchased, from its noncontrolling shareholders, 1,000 shares of its common stock, 10% of the stock outstanding on that date. The price paid was $44,000. The trial balances of Parent and Sub as of 12/31/X2 are given below:
Required (round all amounts to whole dollars; round percentages to one decimal: XX.X%)
a.Prepare the D&D schedule for the 1/1/X1 acquisition.
b.Prepare a schedule to determine the change in Parent's interest in Sub.
c.Prepare the journal entry the parent needed to adjust its interest in Sub. (Note that it has already been included in the parent's trial balance.)
d.Prepare, in journal form, all elimination entries necessary for the 12/31/X2 consolidation worksheet.

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