Reference no: EM132968157

Question - Parent Company acquired 100 percent of the stock of Sub Corp. on January 1, 2015. The stockholder's equity section of Sub's balance sheet at that date is as follows:

Common Stock $200,000

Addl PIC $400,000

Ret. Earnings $500,000

Total $1,100,000

Parent financed the acquisition by using $1,280,000 cash.

Book value approximated fair value for all of Sub's assets and liabilities except for buildings which had a fair value $140,000 more than its book value and a remaining useful life of 7 years. Any remaining differential was related to goodwill.

Required -

1) Present all eliminating/reclassification entries needed to prepare consolidated balance sheet immediately following the acquisition (1/1/15).

2) Show the additional journal entry needed by Parent for amortization of differential during year ended 12/31/2015?

3) Compute the two additional elimination/reclassification entries to be prepared at 12/31/2015 due to the differential.