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P Corporation acquired 80% of S Corporation on January 1, 2011 for $240,000 cash when S's stockholders' equity consisted of $100,000 of Common Stock...
Q1.P Corporation acquired 80% of S Corporation on January 1, 2011 for $240,000 cash when S’s stockholders’ equity consisted of $100,000 of Common Stock and $30,000 of Retained Earnings. The difference between the price paid by P and the underlying equity acquired in S was allocated solely to a patent amortized over 10 years.P sold merchandise to S during the year in the amount of $30,000. $10,000 worth of inventory is still on hand at the end of the year with an unrealized profit of $4,000. The separate company statements for P and S appear in the first two columns of the partially completed consolidated workpaper.Required:Complete the consolidated workpaper for P and S for the year 2011.Q2. Pringle Company owns 104,000 of the 130,000 shares outstanding of Seely Corporation. Seely Corporation sold equipment to Pringle Company on January 1, 2011 for $740,000. The equipment was originally purchased by Seely Corporation on January 1, 2010 for $1,280,000 and at that time its estimated depreciable life was 8 years. The equipment is estimated to have a remaining useful life of four years on January 1, 2011. Both companies use the straight-line method to depreciate equipment. In 2012 Pringle Company reported net income from its independent operations of $3,270,000, and Seely Corporation reported net income of $820,000 and declared dividends of $60,000. Pringle Company uses the cost method to record the investment in Seely Company.Required:A.
