On January 1, 2016, Preston Corporation Acquired an 80% Interest

question 18

Essay

On January 1, 2016, Preston Corporation acquired an 80% interest in Spiegel Company for $2,400,000. At that time Spiegel Company had common stock of $1,800,000 and retained earnings of $800,000. The book values of Spiegel Company's assets and liabilities were equal to their fair values except for land and bonds payable. The land's fair value was $120,000 and its book value was $100,000. The outstanding bonds were issued on January 1, 2005, at 9% and mature on January 1, 2018. The bond principal is $600,000 and the current yield rate on similar bonds is 8%.
Required:
Prepare the workpaper entries necessary on December 31, 2016, to allocate, amortize, and depreciate the difference between implied and book value.

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Definitions:

Latitudes

The measurement of distance north or south of the Earth's equator, typically expressed in degrees.

Hadley Cells

Atmospheric circulatory patterns between the equator and 30 degrees latitude in both hemispheres, characterized by rising warm air near the equator and sinking cool air in the subtropics.

Ocean Currents

Large scale movements of seawater that circulate the world's oceans, driven by factors such as wind, salinity, and temperature gradients.

Average Precipitation

The mean amount of rain, snow, sleet, or hail that falls in a region over a set period, usually measured in millimeters or inches.