Sale of Shares by Subsidiary to Nonaffiliate
Craft Corporation held 80 percent of Delta Corporation’s outstanding common shares on December 31, 20X2, which it had acquired at underlying book value. When the shares were acquired, the fair value of the noncontrolling interest was equal to 20 percent of the book value of Delta Corporation. Balance sheets for the two companies on that date follow:
CRAFT CORPORATION Balance Sheet December 31, 20X2 | |||
Cash Accounts Receivable Inventory Buildings and Equipment Less: Accumulated Depreciation Investment in Delta Corporation | $ 50,000 90,000 180,000 700,000 (200,000) 480,000 | Accounts Payable Mortgages Payable Common Stock Additional Paid-In Capital Retained Earnings | $ 70,000 250,000 300,000 180,000 500,000 |
Total Assets | $1,300,000 | Total Liabilities and Equities | $1,300,000 |
DELTA CORPORATION Balance Sheet December 31, 20X2 | |||
Cash Accounts Receivable Inventory Buildings and Equipment Less: Accumulated Depreciation | $ 50,000 120,000 200,000 600,000 (220,000) | Accounts Payable | $ 70,000 80,000 200,000 50,000 350,000 |
Taxes Payable | |||
Common Stock | |||
Additional Paid-In Capital | |||
Retained Earnings | |||
Total Assets | $ 750,000 | Total Liabilities and Equities | $750,000 |
On January 1, 20X3, Delta issued 4,000 additional shares of its $10 par value common stock to Nonaffiliated Corporation for $45 per share. Craft recorded the change in the book value of its Delta shares as an adjustment to its investment in Delta and an adjustment to its additional paid-in capital.
Required
a. Give the worksheet elimination entry needed in preparing a consolidated balance sheet as of January 1, 20X3, immediately following the sale of shares by Delta.
b. Prepare a consolidated balance sheet worksheet as of the close of business on January 1, 20X3.
c. Prepare a consolidated balance sheet as of the close of business on January 1, 20X3.
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