Reference no: EM131696341

Question - Phillips Company purchased a 90% interest in Standards Corporation for $2,340,000 on January 1, 2016. Standards Corporation had $1,650,000 of common stock and $1,050,000 of retained earnings on that date.

The following values were determined for Standards Corporation on the date of purchase:

                         Book Value             Fair Value

Inventory           $240,000                 $300,000

Land                  2,400,000                2,700,000

Equipment          1,620,000                1,800,000

Required:

A. Prepare a computation and allocation schedule for the difference between the implied and book value in the consolidated statements work paper.

B. Prepare the January 1, 2016, work paper entries to eliminate the investment account and allocate the difference between implied and book value.

Question - Pine Company, a computer manufacturer, owns 90% of the outstanding stock of Slider Company.  On January 1, 2017, Pine sold computers to Slider for $500,000.  The computers, which are inventory to Pine, had a cost to Pine of $350,000.  Slider Company estimated that the computers had a useful life of six years from the date of purchase.

 Slider Company reported net income of $310,000, and Pine Company reported net income of $870,000 from its independent operations (including sales to affiliates) for the year ended December 31, 2017.

Required: 2018: Prepare in general journal form the work paper entries necessary because of the intercompany sales in the consolidated statements workpaper for both 2017 and 2018.

2017: Calculate controlling interest in consolidated net income for 2017.