Reference no: EM132750026
Question - Payton Corporation buys 80 percent of Sheilla Company on January 1, 2017, for $150,000. At the time, Sheilla's common stock was $100,000 and retained earnings totaled $80,000. It was determined that Sheilla's assets and liabilities were all at their fair value except for land. The trial balances of Payton and Sheilla on December 31, 2017, are listed below.
Payton Corporation Sheilla 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 $ 24,000 $ 10,000
Other liabilities 80,000 100,000
Common stock ($10 par) 250,000 100,000
Retained earnings, January 1 135,000 80,000
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 $635,000 $365,000 $365,000
Inventory, December 31 $12,000 $10,000
Required -
A. Find the difference between implied and book value.
B. Record the entries in Payton's books to reflect its transactions with Sheilla in 2017, assuming the cost method.
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