Journal entries and calculations for push down accounting
Par Corporation paid $3,000,000 for an 80 percent interest in Son Corporation on January 1, 2011, when the book values and fair values of Son’s assets and liabilities were as follows (in thousands):
|
Book Value |
Fair Value |
|
|
Cash |
$ 300 |
$ 300 |
|
Accounts receivable—net |
600 |
600 |
|
Inventories |
800 |
2,400 |
|
Land |
200 |
200 |
|
Buildings—net |
600 |
600 |
|
Equipment—net |
1,000 |
500 |
|
$3,500 |
$4,600 |
|
|
Accounts payable |
$ 500 |
$ 500 |
|
Long term debt |
1,000 |
1,000 |
|
Capital stock, $1 par |
800 |
|
|
Retained earnings |
1,200 |
|
|
$3,500 |
REQUIRED
1. Prepare a journal entry on Son’s books to push down 80% of the values reflected in the purchase price (the parent company theory approach).
2. Prepare a journal entry on Son’s books to push down 100% of the values reflected in the purchase price (the entity theory approach).
3. Calculate the noncontrolling interest in Son on January 1, 2011, under parent company theory.
4. Calculate the noncontrolling interest in Son on January 1, 2011, under entity theory.