Majority-Owned Subsidiary Acquired at Greater than Book Value
Zenith Corporation acquired 70 percent of Down Corporation’s common stock on December 31, 20X4, for $102,200. The fair value of the noncontrolling interest at that date was determined to be $43,800. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition:
| Zenith | Down |
Item | Corporation | Corporation |
Cash | $ 50,300 | $ 21,000 |
Accounts Receivable | 90,000 | 44,000 |
Inventory | 130,000 | 75,000 |
Land | 60,000 | 30,000 |
Buildings and Equipment | 410,000 | 250,000 |
Less: Accumulated Depreciation | (150,000) | (80,000) |
Investment in Down Corporation Stock | 102,200 |
|
Total Assets | $692,500 | $340,000 |
Accounts Payable | $152,500 | $ 35,000 |
Mortgage Payable | 250,000 | 180,000 |
Common Stock | 80,000 | 40,000 |
Retained Earnings | 210,000 | 85,000 |
Total Liabilities and Stockholders’ Equity | $692,500 | $340,000 |
At the date of the business combination, the book values of Down’s assets and liabilities approximated fair value except for inventory, which had a fair value of $81,000, and buildings and equipment, which had a fair value of $185,000. At December 31, 20X4, Zenith reported accounts payable of $12,500 to Down, which reported an equal amount in its accounts receivable.
Required
a. Give the eliminating entry or entries needed to prepare a consolidated balance sheet immediately following the business combination.
b. Prepare a consolidated balance sheet worksheet.
c. Prepare a consolidated balance sheet in good form.
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