Plain Corporation Acquired a 75% Interest in Swampy Company on January

question 30

Essay

Plain Corporation acquired a 75% interest in Swampy Company on January 1, 2016, for $2,000,000. The book value and fair value of the assets and liabilities of Swampy Company on that date were as follows: The property and equipment had a remaining life of 6 years on January 1, 2016, and the deferred charge was being amortized over a period of 5 years from that date. Common stock was $1,500,000 and retained earnings was $900,000 on January 1, 2016. Plain Company records its investment in Swampy Company using the cost method.
Required:
Prepare, in general journal form, the December 31, 2016, workpaper entries necessary to:
A. Eliminate the investment account.
B. Allocate and amortize the difference between implied and book value.

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Definitions:

Human Relations Movement

is an approach in organizational management that emphasizes the importance of interpersonal relationships, employee well-being, and motivation.

Manipulate Workers

The act of influencing or controlling employees in a manner that may not be transparent or ethical, often for the benefit of management or the organization.

Ethnocentric

The belief in the inherent superiority of one's own ethnic group or culture, often accompanied by a disdain for other cultures.

Geocentric

Pertains to considering the earth as the center, often related to business strategies that adopt a global approach irrespective of national boundaries.