Pisa Company Acquired 75 Percent of Siena Company on January

question 49

Essay

Pisa Company acquired 75 percent of Siena Company on January 1, 20X3 for $712,500. The fair value of the noncontrolling interest was equal to 25 percent of book value. On the date of acquisition, Siena had common stock outstanding of $300,000 and a balance in retained earnings of $650,000. During 20X3, Siena purchased inventory for $35,000 and sold it to Pisa for $50,000. Of this amount, Pisa reported $20,000 in ending inventory in 20X3 and later sold it in 20X4. In 20X4, Pisa sold inventory it had purchased for $40,000 to Siena for $60,000. Siena sold $45,000 of this inventory in 20X4.
Income and dividend information for Siena for 20X3 and 20X4 are as follows: Pisa Company uses the cost method.
Required:
a. Present the worksheet elimination entries necessary to prepare consolidated financial statements for 20X3.
b. Present the worksheet elimination entries necessary to prepare consolidated financial statements for 20X4.

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Definitions:

Relationship Demise

The end or breakdown of a relationship between individuals or entities, marked by a significant negative change or the conclusion of interaction.

Marital Relationships

Marital Relationships refer to the interpersonal bonds and interactions between individuals in a marriage, encompassing aspects like communication, emotional support, and conflict resolution.

Negative Affect Reciprocity

A tendency for negative emotions in one partner to follow from the other partner’s negativity.

Gottman

A reference to John Gottman, a psychologist known for his work on marital stability and relationship analysis through scientific direct observations.