On January 1 2014 Pump Company acquired all the

outstanding #6356
On January 1, 2014, Pump Company acquired all the outstanding common stock of Sound
Company for $556,000 in cash. Financial data relating to Sound Company on January 1, 2014,
are presented here:Sound Company would expect to pay 10% interest to borrow long-term
funds on the date of acquisition. During 2014, Sound Company wrote its receivables down by
$10,690 and recorded a corresponding loss. Sound Company accounts for its inventories at
lower of FIFO cost or market. Its buildings and equipment had a remaining estimated useful life
on January 1, 2014, of 10 years and 2½ years, respectively. Sound Company reported net
income of $80,000 and declared no dividends in 2014.Required:A. Prepare in general journal
form the December 31, 2014, workpaper entries necessary to eliminate the investment account
and to allocate and depreciate the difference between book value and the value implied by the
purchase price.B. Assume that Pump Company's net income from independent operations in
2014 amounts to $500,000. Calculate the controlling interest in consolidated net income for
2014.View Solution:
On January 1 2014 Pump Company acquired all the outstanding

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