Parent Company acquired 90% of Son Inc. on January 31, 20X2 in exchange for cash. The book value of Son's individual assets and liabilities approximated their acquisition-date fair values. On the date of acquisition, Son reported the following: Cash$350,000 Current Liabilities$120,000 Inventory 100,000 Plant Assets (net) 320,000 Common Stock 100,000 Property 500,000 Retained Earnings 1,050,000 Total Assets$1,270,000 Total Liabilities & Equity$1,270,000 During the year Son Inc. reported $310,000 in net income and declared $15,000 in dividends. Parent Company reported $520,000 in net income and declared $25,000 in dividends. Parent accounts for their investment using the equity method.Required: 1) What journal entry will Parent make on the date of

Question

acquisition to record the Investment in Son Inc.?2) If Parent were to prepare a consolidated balance sheet on the acquisition date (January 31, 20X2), what is the basic consolidation entry Parent would use in the consolidation worksheet?3) What is Parent's balance in "Investment in Son Inc." prior to consolidation on December 31, 20X2?4) What is the basic consolidation entry Parent would use in the consolidation worksheet on December 31, 20X2?

What will be an ideal response?

Answer 1

1)