Reference no: EM132218217
Question - On January 1, 2012, Pence Company purchased 95% of the outstanding common stock of Sessions Company for $160,000. At that time, Sessions' stockholders' equity consisted of common stock, $120,000; other contributed capital, $10,000; and retained earnings, $23,000. Any difference between the implied value of the company and the book value is attributable to goodwill. On December 31, 2012, the two companies' trial balances were as follows:
PERFORM USING COST METHOD, THEN PERFORM USING EQUITY METHOD
Step 1. Prepare a T-Account to keep track of Pence's Investment in Sessions. Record the date of acquisition entry.
Step 2. Prepare the Computation and Allocation of Difference Schedule.
Step 3. Prepare the investment elimination entries as of the date of acquisition and year after acquisition.
Step 4. Prepare the consolidating financial statement work paper.
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