Reference no: EM132692791

Question - On December 1, 2020 P and S Corporation come to an agreement where P will acquire 40% of the ordinary shares of S from its existing stockholders by issuing 400,000 ordinary shares with P1 par. The shares have a fair value of 1.20 per share on the date of agreement. Before this agreement, on November 30, P has an existing 40% investment in the ordinary shares of S. P accounted the existing investment as an investment in associate and has a book value and fair value of 400,000 and 500,000 on acquisition date, respectively.

On December 31, 2020, P Corporation issued the 400,000 ordinary shares to S corporation. On such date, the shares have a fair value of 1.75 per share.

P corporation paid 41,145 in stock issuance costs.

Assume that the fair value of non-controlling interest is 400000

P Corporation's December 31, 2020 statement of financial position presents the following:

Assets

Cash 2,457,813

Accounts Receivable 999,014

Inventory 913,131

Investment in Associate 400,000

Land 3,214,784

Building (net) 2,333,333

Total Assets 10,318,075

Liabilities and Equity

Accounts Payable 1,999,999

Bonds Payable 1,478,632

Common stock (P1 par) 4,200,698

Additional paid in capital 1,154,008

Retained earnings 1,484,738

Total Liabilities and Equity 10,318,075

The assets and liabilities of P at December 31, 2020 are properly valued, except:

1. Inventory should have a fair value of 1,100,000

2. Land should be fairly valued at 2,500,000

S Corporation's December 31, 2020 statement of financial position presents the following:

Assets

Cash 88,888

Accounts Receivable 248,888

Inventory 188,888

Trademark 48,888

Land 488,888

Building (net) 348,888

Total Assets 1,413,328

Liabilities and Equity

Accounts Payable 88,888

Bonds Payable 398,888

Common stock (P1 par) 488,888

Additional paid in capital 248,888

Retained earnings 187,776

Total Liabilities and Equity 1,413,328

The assets and liabilities of S at December 31, 2020 are properly valued, except:

1. Inventory should have a fair value of 149,999

2. An unrecognized intangible asset (franchise) fairly valued at 39,999

3. Land should be fairly valued at 599,999

Assume P used cost method to account the subsidiary, and accounts NCI at Fair Value

Required - Record the transactions to account the investment

1. Prepare working paper elimination entries to prepare the consolidated financial statements.

2. Prepare the consolidated statement of financial position at the date of acquisition.