Consolidation of Subsidiary with Negative Retained Earnings
General Corporation acquired 80 percent of Strap Company’s voting common stock on January 1, 20X4, for $138,000. At that date, the fair value of the noncontrolling interest was $34,500. Strap’s balance sheet at the date of acquisition contained the following balances:
STRAP COMPANY Balance Sheet January 1, 20X4 | |||
Cash | $ 20,000 | Accounts Payable | $ 35,000 |
Accounts Receivable | 35,000 | Notes Payable | 180,000 |
Land | 90,000 | Common Stock | 100,000 |
Building and Equipment | 300,000 | Additional Paid-in Capital | 75,000 |
Less: Accumulated Depreciation | (85,000) | Retained Earnings | (30,000) |
Total Assets | $360,000 | Total Liabilities and Stockholders’ Equity | $360,000 |
At the date of acquisition, the reported book values of Strap’s assets and liabilities approximated fair value.
Required
Give the eliminating entry or entries needed to prepare a consolidated balance sheet immediately following the business combination.
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