Reference no: EM133147078

Question - Pharma Corporation acquired 60% of the voting stock of Santos Inc. at an acquisition cost of $210,000 on January 1, 2020. The fair value of the noncontrolling interest was $120,000. Santos's equity at the date of acquisition was as follows:

Common stock $10,000

Additional paid-in capital 20,000

Retained earnings 50,000

Total $80,000

Santos's identifiable net assets were reported at values approximating fair value except that its inventories were undervalued by $10,000, its plant assets were overvalued by $25,500, and it had previously unreported identifiable intangible assets valued at $85,000. The entire beginning inventories were sold in 2020. The remaining useful life of plant assets and intangible assets was both five years with no salvage value. Santos used straight-line depreciation and amortization. During 2020, Santos had a net income of $48,000 and Other Comprehensive Loss of $5,000. On December 23, 2020, Santos declared and paid $10,000 cash dividend to its shareholders.

Required -

(1) Calculate equity in net income of Santos and non-controlling interest in net income for 2020.

(2) Prepare the working paper entries eliminating entries (C), (E), (R), (O) and (N) for PayPal Company and subsidiary for the year ended December 31, 2020.