On January 1, 2014, Jeff Company acquired a 90% interest in Marian Company for $198,000 cash. On January 1, 2014, Marian Company had the following assets and liabilities:
Book Value Fair Value
Cash $5,000 $5,000
Accounts Receivable 30,000 35,000
Inventory 40,000 50,000
Plant Assets 60,000 80,000
Total Assets $135,000 $170,000
Liabilities $25,000 $25,000
Capital Stock 100,000
Retained Earnings 10,000
Total Liabilities &
Stockholders' Equity $135,000
Push-down accounting is used for the acquisition.
Required:
1. Assume both companies use the entity theory. Prepare the elimination entry(ies) on consolidating work papers on January 1, 2014.
2. Assume both companies use the parent company theory. Prepare the elimination entry(ies) on consolidating work papers on January 1, 2014.
Requirement 1
Capital stock 100,000
Push down capital 120,000
Investment in Marian Company 198,000
Noncontrolling interest ($220,000 × 10%) 22,000
Requirement 2
Capital stock 100,000
Push down capital 109,000
Investment in Marian Company 198,000
Noncontrolling interest ($110,000 × 10%) 11,000
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