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sale of additional shares to parent lane manufacturing company acquired 75 percent o 733629

Sale of Additional Shares to Parent

Lane Manufacturing Company acquired 75 percent of Tin Corporation stock at underlying book value. At the date of acquisition, the fair value of the noncontrolling interest was equal to 25 percent of Tin’s book value. The balance sheets of the two companies for January 1, 20X1, are as follows:

LANE MANUFACTURING COMPANY

Balance Sheet

January 1, 20X1

Cash

$ 227,500

Accounts Payable

$ 50,000

Accounts Receivable

60,000

Bonds Payable

400,000

Inventory

100,000

Common Stock

200,000

Buildings & Equipment

600,000

Additional Paid In Capital

50,000

Less: Accumulated Depreciation

(150,000)

Retained Earnings

400,000

Investment in Tin Products

262,500

Total Assets

$1,100,000

Total Liabilities & Equities

$1,100,000

TIN CORPORATION

Balance Sheet

January 1, 20X1

Cash

$ 60,000

Accounts Payable

$ 50,000

Accounts Receivable

100,000

Bonds Payable

300,000

Inventory

180,000

Common Stock ($10 par)

100,000

Buildings & Equipment

600,000

Additional Paid In Capital

50,000

Less: Accumulated Depreciation

(240,000)

Retained Earnings

200,000

Total Assets

$700,000

Total Liabilities & Equities

$700,000

On January 2, 20X1, Lane purchased an additional 2,500 shares of common stock directly from Tin for $150,000. Any purchase differential is assigned to buildings and equipment.

Required

a. Prepare the elimination entry needed to complete a consolidated balance sheet worksheet immediately following the issuance of additional shares to Lane.

b. Prepare a consolidated balance sheet worksheet immediately following the issuance of additional shares to Lane.

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