Reference no: EM132913415
E. P corp acquired all of the outstanding P10 par common stock of S company on Jan 1, 2012, in exchange for 50,000 shares of its P10 par common stock.
On Dec 31, 2011, the common stock of P corp has a closing market price of P15 per share on the national stock exchange.
Additional information:
1. There have been no changes in the equity accounts of S company since date.
2. At the acquisition date, the fair value of S company's machinery exceeded book value by ?54,000.
The excess is being amortized over the estimated average remaining life of 6 years.
The fair value of S company's other assets & liabilities were equal to book values. Any remaining excess is goodwill.
3. On Jan 1, 2014, P corp sold equipment to S company for 56,000.
The equipment was acquired by P corp; 2 years ago at a cost of ?80,000, and depreciated it using the straight the method or an estimated life of 5 years with no salvage value
4. During 2014, P purchased merchandise from S for ?180,000, which included a 100% markup on cost.
At Dec 31, 2014, P owed S ?75,000 on these purchases, & ?36,000 of the merchandise purchased remained in P's inventory.
5. Intercompany trade payables/receivables amounted to ?75,000
Required:
Problem a. Present the assumed entry on the books of P corp on sale of equipment on Jan 1, 2014.
Problem b. Present the assumed entry of the books of S company
Problem c. Present assumed depreciation entry on the books of S corp on Dec 31, 2014.