Phone Corporation acquired 70 percent of Smart Corporation’s common stock on December 31, 20X4, for $97,300. At that date, the fair value of the noncontrolling interest was $41,700. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: Item Phone Corporation Smart Corporation Cash $ 58,300 $ 22,000 Accounts Receivable 109,000 49,000 Inventory 144,000 79,000 Land 73,000 36,000 Buildings & Equipment 426,000 266,000 Less: Accumulated Depreciation (166,000) (75,000) Investment in Smart Corporation 97,300 Total Assets $ 741,600 $ 377,000 Accounts Payable $ 142,500 $ 26,000 Mortgage Payable 331,100 233,000 Common Stock 68,000 39,000 Retained Earnings 200,000 79,000 Total Liabilities & Stockholders’ Equity $ 741,600 $ 377,000 At the date of the business combination, the book values of Smart’s assets and liabilities approximated fair value except for inventory, which had a fair value of $85,000, and buildings and equipment, which had a fair value of $206,000. At December 31, 20X4, Phone reported accounts payable of $13,400 to Smart, which reported an equal amount in its accounts receivable. Required: Prepare the consolidation entry or entries needed to prepare a consolidated balance sheet immediately following the business combination. Prepare a consolidated balance sheet worksheet.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Phone Corporation acquired 70 percent of Smart Corporation’s common stock on December 31, 20X4, for $97,300. At that date, the fair value of the noncontrolling interest was $41,700. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition:

Item	Phone Corporation	Smart Corporation
Cash	$ 58,300	$ 22,000
Accounts Receivable	109,000	49,000
Inventory	144,000	79,000
Land	73,000	36,000
Buildings & Equipment	426,000	266,000
Less: Accumulated Depreciation	(166,000)	(75,000)
Investment in Smart Corporation	97,300
Total Assets	$ 741,600	$ 377,000
Accounts Payable	$ 142,500	$ 26,000
Mortgage Payable	331,100	233,000
Common Stock	68,000	39,000
Retained Earnings	200,000	79,000
Total Liabilities & Stockholders’ Equity	$ 741,600	$ 377,000

At the date of the business combination, the book values of Smart’s assets and liabilities approximated fair value except for inventory, which had a fair value of $85,000, and buildings and equipment, which had a fair value of $206,000. At December 31, 20X4, Phone reported accounts payable of $13,400 to Smart, which reported an equal amount in its accounts receivable.

Required:

Prepare the consolidation entry or entries needed to prepare a consolidated balance sheet immediately following the business combination.
Prepare a consolidated balance sheet worksheet.

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