On January 1 2014 Palmero Company purchased an 80

interest #6349
On January 1, 2014, Palmero Company purchased an 80% interest in Santos Company for
$2,800,000, at which time Santos Company had retained earnings of $1,000,000 and capital
stock of $500,000. On the date of acquisition, the fair value of the assets and liabilities of
Santos Company was equal to their book value, except for property and equipment (net), which
had a fair value of $1,500,000 and a book value of $600,000. The property and equipment had
an estimated remaining life of 10 years. Palmero Company reported net income from
independent operations of $400,000 in 2014 and $425,000 in 2015. Santos Company reported
net income of $300,000 in 2014 and $400,000 in 2015. Neither company declared dividends in
2014 or 2015. Palmero uses the cost method to account for its investment in
Santos.Required:A. Prepare in general journal form the entries necessary in the consolidated
statements workpapers for the years ended December 31, 2014 and 2015.B. Prepare a
schedule or t-account showing the calculation of the controlling and non-controlling interest in
consolidated net income for the years ended December 31, 2014 and December 31, 2015.View
Solution:
On January 1 2014 Palmero Company purchased an 80 interest

ANSWER
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