Eliminate the investment account

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Reference no: EM132923180

Question - Plain Corporation acquired a 75% interest in Swampy Company on January 1, 2016, for $2,000,000. The book value and fair value of the assets and liabilities of Swampy Company on that date were as follows:

The property and equipment had a remaining life of 6 years on January 1, 2016, and the deferred charge was being amortized over a period of 5 years from that date. Common stock was $1,500,000 and retained earnings was $900,000 on January 1, 2016. Plain Company records its investment in Swampy Company using the cost method.

Required - Prepare, in general journal form, the December 31, 2016, workpaper entries necessary to:

A. Eliminate the investment account.

B. Allocate and amortize the difference between implied and book value.

Reference no: EM132923180

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