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question alarm bird inc acquired an 85 interest in clock corporation on january 2 20 4281496

Question

Alarm Bird Inc. acquired an 85% interest in Clock Corporation on January 2, 2005 for $38,000 cash when Clock had Capital Stock of $15,000 and Retained Earnings of $25,000. Clock’s assets and liabilities had book values equal to their fair values except for inventory that was undervalued by $2,000. Balance sheets for Alarm Bird and Clock on January 2, 2005, immediately after the business combination, are presented in the first two columns of the consolidated balance sheet working papers.

Alarm Bird Inc. acquired an 85% interest in Clock Corporation on January 2, 2005 for $38,000 cash when Clock had Capital Stock of $15,000 and Retained Earnings of $25,000. Clock’s assets and liabilities had book values equal to their fair values except for inventory that was undervalued by $2,000. Balance sheets for Alarm Bird and Clock on January 2, 2005, immediately after the business combination, are presented in the first two columns of the consolidated balance sheet working papers.

Alarm Bird Corporation and Subsidiary

 

                 

Consolidated Balance Sheet Working Papers

 

                 

at January 2, 2005

 

                 

 

 

                 

 

Alarm Bird

Clock

Eliminations

 

 

 

                 

Debit

Credit

Balance

 

                 

Sheet

 

                 

ASSETS

 

 

 

 

 

 

 

 

                 

Cash

$

68,000

$4,000

                 

Accounts

 

75,000

9,000

 

 

 

 

 

                 

Receivable-net

                 

 

 

39,000

10,000

 

 

 

 

 

                 

Inventories

                 

 

 

170,000

35,000

 

 

 

 

 

                 

Plant assets-net

                 

Investment in

 

38,000

 

 

 

 

 

 

                 

Clock

                 

 

 

 

 

 

 

 

 

 

                 

Total Assets

$

390,000

$58,000

                 

 

 

 

 

 

 

 

 

 

                 

EQUITIES

$

120,000

$18,000

 

 

 

 

 

Payables

 

 

 

 

 

 

 

 

 

 

 

100,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital stock

15,000

 

 

 

 

 

 

 

 

 

Retained

 

170,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings

25,000

 

 

 

 

 

 

 

 

 

Minority

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest

 

 

 

 

 

 

 

 

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL EQUITIES

390,000

$58,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Required:

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Complete the consolidation balance sheet working papers for Alarm Bird and subsidiary at January 1, 2005.

 

 

 

 

 

 

 

 

 

                                   

 

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