Peerless acquires all of Special Foods’ common stock for $300,000, an amount equal Journal Entries

Balance Sheets of Peerless Products and Special Foods, Balance Sheets of Peerless Products and Special Foods,
to the fair value of Special Foods as a whole. Special Foods reports 20X1 net income
January 1, 20X1, Immediately before Combination January 1, 20X1, Immediately after Combination
50.000 and declares devidends 30.000
Peerless Special Peerless Special December 31, 20X1
Products Foods Products Foods (13) Investment - Special Foods
Assets Journal Entries Assets
Cash $350,000 $50,000 January 1, 20X1 Cash $50,000 $50,000 Record net income of Special Foods =
Accounts Receivable 75,000 50,000 (12) Investment in Special Foods 300,000 Accounts Receivable 75,000 50,000
Inventory 100,000 60,000 Cash 300,000 Inventory 100,000 60,000
Land 175,000 40,000 Record purchase of Special Foods stock. Land 175,000 40,000 (14) Cash
Buildings and Equipment 800,000 600,000 Buildings and Equipment 800,000 600,000
Accumulated Depreciation (400,000) (300,000) Accumulated Depreciation (400,000) (300,000) Record devidend of Special Foods = 10
Total Assets $1,100,000 $500,000 Calculation Investment in Special Foods Stock 300,000
Cost of Investment/ Fair value of consideration = 300,000 Total Assets $1,100,000 $500,000
Liabilities and Stockholders’ Equity Book value of shares acquired:
Accounts Payable $100,000 $100,000 Common stock - Special Foods 200,000 Liabilities and Stockholders’ Equity
Bonds Payable 200,000 100,000 Retained Earnings -Special Foods 100,000 Accounts Payable $100,000 $100,000
Common Stock 500,000 200,000 APIC 0 Bonds Payable 200,000 100,000
Retained Earnings 300,000 100,000 Equities of Special Foods 300,000 x 100% = 300,000 _ Common Stock 500,000 200,000
Total Liabilities and Equity $1,100,000 $500,000 Diffential = 0 Retained Earnings 300,000 100,000
Total Liabilities and Equity $1,100,000 $500,000
Cost of Investment
300,000 Goodwill
Total Differential 0
0 Fair value of net assets
300,000 Diff
Assets
Book value of net assets 0
300,000
 AFTER 1 YEAR

Balance of Investment and Net Income Elimination Entries

Investment - Special Foods Investment elimination entry

estment - Special Foods 50,000 Beg 300,000 (14) 30,000 E (15) Common Stock—Special Foods 200,000
Income - Special Foods 50,000 (13) 50,000 Retained Earnings 100,000
ord net income of Special Foods = 100% x 50.000 Income - Special Foods 50,000
320,000 Investment in Special Foods Stock 320,000
Devidend Declared 30,000
30,000 Income - Special Foods
Investment - Special Foods 30,000 Beg 0 Optional accumulation depreciation
ord devidend of Special Foods = 100% x 30.000 (13) 50,000 E (16) Accumulation depreciation 300,000
Building and equipment 300,000
50,000
 Worksheet for Consolidation Balance Sheets, January 1, 20X1, Date of Combination: 100%

Peerless Special Emination Entry Consolidation

Item
Products Foods Dr Cr

Sales 400,000 200,000 600,000

Sales from Subsidiary 50,000 - (15) 50,000 0
Credit 450,000 200,000 600,000

Cost of Goods Sold 170,000 115,000 285,000

Depresiation & amortization 50,000 20,000 70,000

Other Expense 40,000 15,000 55,000

Debit (260,000) (150,000) (410,000)
190,000
Income - Minority - - (0)

Net Income 190,000 50,000 50,000 190,000

R/E, January 1 300,000 100,000 (15) 100,000 300,000

Net Income from Above 190,000 50,000 50,000 190,000
490,000 150,000 490,000
Divident (60,000) (30,000) (15) 30,000
(60,000)
R/E, Desember 31 430,000 120,000 150,000 30,000 430,000

Cash 210,000 75,000 285,000

Account Receivable 75,000 50,000 125,000
Inventory 100,000 75,000 175,000
Land 175,000 40,000 215,000
Building & Equipment 800,000 600,000 (16) 300,000 1,100,000
Investment - PT Promo 320,000 - (15) 320,000 0
0
Goodwill - ### -
Differential - ### 0
Debit 1,680,000 840,000 1,900,000

Accm. Depresiation 450,000 320,000 (16) 300,000 470,000

Account Payable 100,000 ### 200,000
Bond Payable 200,000 100,000 300,000
Common Stock 500,000 200,000 (15) 200,000 500,000
Retained Eraning 430,000 120,000 150,000 30,000 430,000
Minority - 0
-
Credit 1,680,000 840,000 650,000 650,000 1,900,000