Qasim almansi / 201820414

3) Park Corporation paid $180,000 for a 75% interest in Stem Co.'s

outstanding Capital Stock on January 1, 2014, when Stem's stockholders'
equity consisted of $150,000 of Capital Stock and $50,000 of Retained
Earnings. Book values of Stem's net assets were equal to their fair values on
this date. The adjusted trial balances of Park and Stem on December 31,
2014 were as follows:

Park Stem
Cash $8,250 $35,000
Dividends receivable 7,500
Other current assets 40,000 50,000
Land 50,000 30,000
Plant assets-net 100,000 150,000
Investment in Stem 195,000
Cost of sales 225,000 125,000
Other expenses 45,000 25,000
Dividends 25,000 20,000
$695,750 $435,000

Accounts payable $40,750 $35,000

Dividends payable 10,000
Capital stock 150,000 150,000
Retained earnings 75,000 50,000
Sales revenue 400,000 190,000
Income from Stem 30,000
$695,750 $435,000
Required: Complete the partially prepared consolidated balance sheet working papers that
appear below.
 Answer:
Preliminary computations
Fair value (purchase price) of 75% interest acquired $180,000
Implied fair value of Stem ($180,000 / 75%) $240,000
Book value of Stem's net assets $ (200,000)
Excess fair value over book value acquired $40,000
Initial investment cost $180,000
Income from Stem: (75%)($40,000)= $ 30,000
Dividends ($20,000)(75%) = -15,000
Balance in Investment in Stem at December 31,2014 $195,000

Consolidate
d
Eliminations
Park Stem Balance
sheet
DR CR
Cash $ 8500 35000 43,250

Dividends Recevable 7500 B 7,500 0

Other cureent asset 40000 50000 90000

Land 50000 30000 80000

Plant assets 100000 150000 250000

Investment in stem 195000 a 195000

Good will 40000 40000

Total asset 400750 265000 503250

Account payable 40750 35000 75750

Dividends payable 10000 B 7500 2500

Capital stock 150000 150000 a 150000 1500000

Retained earnings 210000 70000 A 70000 210000

Noncontrolimg interest 65000 65000

Total equity 400750 265000 503250

267500 267500