Olson Corporation Paid $62,000 to Acquire 100% of Towing Corporation's

question 38

Essay

Olson Corporation paid $62,000 to acquire 100% of Towing Corporation's outstanding voting common stock at book value on May 1,2013.The stockholders' equity of Towing on January 1,2013 consisted of $40,000 Capital Stock and $20,000 Retained Earnings.Towing's total dividends for 2013 were $6,000,paid equally on April 1 and October 1.Towing's net income was earned uniformly throughout 2013.In 2013,preacquisition sales were $10,000 and preacquisition expenses were cost of sales for $5,000.(There were no other preacquisition expenses in 2013 . )
During 2013,Olson made sales of $10,000 to Towing at a gross profit of $3,000.One-half of this merchandise was inventoried by Towing at year-end,and one-half of the 2011 intercompany sales were unpaid at year-end 2013.
Olson sold equipment with a ten-year remaining useful life to Towing at a $2,000 gain on December 31,2013.The straight-line depreciation method is used by both companies.The equipment has no salvage value.
Financial statements of Olson and Towing Corporations for 2013 appear in the first two columns of the partially completed consolidation working papers.
Required:
Complete the consolidating working papers for Olson Corporation and Subsidiary for the year ending December 31,2013.

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Definitions:

Quantity Demanded

The overall quantity of a product or service that buyers are ready and capable of buying at a specific price.

Price Change

Refers to the variation in the cost of a good or service over time.

Short Run

A period in economics during which at least one input, such as plant size, is fixed and cannot be changed.

Long Run

A period in economics where all factors of production and costs are variable, allowing for complete industry adjustment.