Pisa Company acquired 75 percent of Siena Company on January 1, 20X3 for $712,50
ID: 2472256 • Letter: P
Question
Pisa Company acquired 75 percent of Siena Company on January 1, 20X3 for $712,500. The fair value of the noncontrolling interest was equal to 25 percent of book value. On the date of acquisition, Siena had common stock outstanding of $300,000 and a balance in retained earnings of $650,000. During 20X3, Siena purchased inventory for $35,000 and sold it to Pisa for $50,000. Of this amount, Pisa reported $20,000 in ending inventory in 20X3 and later sold it in 20X4. In 20X4, Pisa sold inventory it had purchased for $40,000 to Siena for $60,000. Siena sold $45,000 of this inventory in
Income and dividend information for Siena for 20X3 and 20X4 are as follows:
Net Income Dividends
20x3 150,000 40,000
20x4 200,000 50,000
Pisa Company uses the equity Required:
a. Present the worksheet elimination entries necessary to prepare consolidated financial statements for b. Present the worksheet elimination entries necessary to prepare consolidated financial statements for 20X4. Please show every step used to calculate answers.
Explanation / Answer
a. 2013
b. 2014
Book Value Calculation NCI 25% + Pisa Co 75% = Common Stock + Retained Earnings Beginning Book Value 237,500 712,500 300,000 650,000 Ad: Net Income 37,500 112,500 150,000 Less: dividends (10,000) (30,000) (40,000) Ending Book Value 265,000 795,000 300,000 760,000