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Python Corporation buys 80 percent of Shark Company on January 1, 2013, for $150,000. At the time, Shark's common stock was $100,000 and retained earnings totaled $80,000. It was determined that Shark's assets and liabilities were all at their fair value except for land. The trial balances of Python and Shark on December 31, 2013, are listed below.
Python Corporation Shark Company
Debit
Credit
Debit Credit
Cash $ 25,000
$ 10,000
Receivables (net) 10,000
11,000
Inventory, January 1 15,000
9,000
Investment in S 150,000
Plant and equipment (net 225,000
185,000
Land 100,000
80,000
Accounts payable
S 24,000
Other liabilities
100,000
Common stock ($10 par)
250,000
Retained earnings, January 1
135,000
Dividends declared 15,000
20,000
Sales
130,000
75,000
Dividend income
16,000
Purchases 55,000
25,000
Expenses 40 000
25 000
$635 000
$365 000
$365,000
Inventory, December 31 $12,000
$10,000
Question A. Find the difference between implied and book value.
Question B. Record the entries in Python's books to reflect its transactions with Shark in 2013, assuming the cost method.
Question C. Prepare the entries on December 31, 2013:
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