Reference no: EM132928682

Question - On January 1, 20X7, Apple Corporation acquired 90 percent of Banana Corporation's common stock for $315,000. At the date of acquisition, the fair value of the noncontrolling interest was $35,000, and Banana reported common stock outstanding of $150,000 and retained earnings of $180,000. The differential is assigned to a patent with a remaining life of eight years. Each year since acquisition, Banana has reported income from operations of $50,000 and paid dividends of $30,000.

Banana acquired 75 percent ownership of Cherry Company on January 1, 20X9, for $187,500. At that date, the fair value of the noncontrolling interest was $62,500, and Cherry reported common stock outstanding of $100,000 and retained earnings of $130,000. In 20X9, Cherry reported net income of $20,000 and paid dividends of $8,000. The differential is assigned to buildings and equipment with an economic life of 10 years at the date of acquisition.

Required -

1) Prepare the journal entries recorded by Banana for its investment in Cherry during 20X9.

2) Prepare the journal entries recorded by Apple for its investment in Banana during 20X9.

3) Prepare the consolidating entries related to Banana's investment in Cherry and Apple's investment in Banana needed to prepare consolidated financial statements for Apple and its subsidiaries at December 31, 20X9.