Question

Pool Company purchased 90% of the outstanding common stock of Spruce Company on December 31, 2014,...

Pool Company purchased 90% of the outstanding common stock of Spruce Company on December 31, 2014, for cash. At that time the balance sheet of Spruce Company was as follows:

Current assets $1,135,400
Plant and equipment 1,069,190
Land 175,250
   Total assets $2,379,840
Liabilities $830,150
Common stock, $20 par value 825,300
Other contributed capital 441,330
Retained earnings 377,560
   Total 2,474,340
Less treasury stock at cost, 4,725 shares 94,500
   Total equities $2,379,840

Prepare the elimination entry required for the preparation of a consolidated balance sheet workpaper on December 31, 2014, assuming the purchase price of the stock was $1,218,920. Assume that the subsidiary land has a fair value of $184,830, and the other assets and liabilities are fairly valued.

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Ans:

Journal Entry

Date

Accounts Title

Debit

Credit

Common Stock

$825300

Other Contribution Capital

$441,330

Retained Earning

$377,560

Land ($184,830-$175,250)

$9,580

Investment in Spruce Company

$1,218,920

Non Controlling Interest ($1,218,920/0.90*0.10)

$135,436

Treasury Stock

$94,500

Gain on Purchase of Business -Pool

$204,914

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