Intercorporate Receivables and Payables
Kim Corporation acquired 100 percent of Normal Company’s outstanding shares on January 1, 20X7. Balance sheet data for the two companies immediately after the purchase follow:
| Kim Corporation | Normal Company |
Cash | $ 70,000 | $ 35,000 |
Accounts Receivable | 90,000 | 65,000 |
Inventory | 84,000 | 80,000 |
Buildings and Equipment | 400,000 | 300,000 |
Less: Accumulated Depreciation | (160,000) | (75,000) |
Investment in Normal Company Stock | 305,000 |
|
Investment in Normal Company Bonds | 50,000 |
|
Total Assets | $839,000 | $405,000 |
Accounts Payable | $ 50,000 | $ 20,000 |
Bonds Payable | 200,000 | 100,000 |
Common Stock | 300,000 | 150,000 |
Capital in Excess of Par |
| 140,000 |
Retained Earnings | 289,000 | (5,000) |
Total Liabilities and Equities | $839,000 | $405,000 |
As indicated in the parent company balance sheet, Kim purchased $50,000 of Normal’s bonds from the subsidiary immediately after it acquired the stock. An analysis of intercompany receivables and payables also indicates that the subsidiary owes the parent $10,000. On the date of combination, the book values and fair values of Normal’s assets and liabilities were the same.
Required
a.Give all eliminating entries needed to prepare a consolidated balance sheet for January 1, 20X7.
b.Complete a consolidated balance sheet worksheet.
c.Prepare a consolidated balance sheet in good form.
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