Question

Case: Papa Burger Inc. has determined that they need to add to their product line. They have decided to acquire an interest in Sloppy Joe Cormpany that would provide significant infuence and control. The following are the purchase details: On January 1, 2010 the following took place Parent Co. paid Parent Purchased X% of Sub. 1 Complete the REAL ENTRY to record the investment. It has been determined that the Parent Company has signiftant infuence and control Date Account Debit Credit Additional Base Information: Subsidiary Equity Positon s of /1/2010 Common Stock-Sub APIC-Sub Retained Earnings-Sub $50,000 $350,000 575,00 975,000 2. Prepare the CAD Note: H1Her RVewing Stoppa Joe's accounts the onty account vithaHitterente pool valire and tair vatie Ts land. Aco Bool Valu Fai Vale band335,000 445,000 tie concolida tion warl iirat acquistion 4, Lowplcte le Conso datan worl paper

Answer 1

Ans)

1)

	Journal Entry
Date	Account	Debit	Credit
Jan 1,2010	Investment In Subsidiary a/c	900,000
	To Cash a/c		900,000
	(being amount invested in sloppy joe company)

2)Preparation of CAD

Amount Invested In Joe's Company		900,000
Less; 80% value of Joe's Company Assets
Common Stock-	50,000
APIC-	350,000
Retained Earnings-	575,000
	975,000
80% value of 975,000		-780,000
Excess amount Invested		120,000
Less; 80% of Excess amount for increase in land
80% of (415,000-335,000)		-64,000
CAD (goodwill)		56,000

3)Work paper Entry needed for the consolidation workpaper

	Journal Entry
Date	Account	Debit	Credit
Jan 1,2012	Capital Stock (joe' company) a/c	50,000
	APIC (Joe's company) a/c	350,000
	Retained Earning (Joe's company) a/c	575,000
	Unamortised excess a/c	120,000
	To Investment in Subsidiary a/c		900,000
	To Non Control Interest a/c		195,000
	(being consolidated working paper adjusted)

4) Consolidation working paper on Jan 1,2010

Assets	Papa Burger Inc	Sloppy Joe Inc	Debit	Credit	NCI	Consolidated Balance
Cash	250,000	150,000				400,000
Account Receivables	250,000	150,000				400,000
inventory	200,000	250,000				450,000
Investment In Subsidiary	900,000			900,000
equipment	2,200,000	740,000				2,940,000
Building	550,000	350,000				900,000
Land	120,000	335,000	80,000		16,000	535,000
Goodwill(Cad)			56,000			56,000
Total Assets	4,470,000	1,975,000				5,681,000
Liabilities
Accounts Payable	500,000	200,000				700,000
Short Term Debt	850,000	800,000				1,650,000
Mortgage Payable	2,100,000					2,100,000
Total Liabilities	3,450,000	1,000,000				4,450,000
Equiy
Common Stock- Papa	60,000					60,000
Common stock - Sloppy		50,000	50,000
APIC- Papa	610,000					610,000
APIC-Sloppy		350,000	350,000
RE- Papa	350,000					350,000
RE- Sloppy		575,000	575,000
NCI-Common Stock				10,000
NCI_APIC				70,000
NCI-Retained Earnings				115,000	195,000
NCI					211,000	211,000
Total Equity	1,020,000	975,000	975,000	195,000	406,000	1,231,000
Total Equity & Liabilities	4,470,000	1,975,000				5,681,000