Sep 25, 2017 term paper 2

ASSUME THAT ON 1/1/01 BIG ACQUIRED 80% OF LITTLE CO FOR $400,000. THE FAIR VALUE OF THE…

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  1. Assume that on 1/1/01 Big acquired 80% of Little Co for $400,000. The fair value of the non-controlling interest on that date was $100,000. Little’s book value on that date was $350,000. All of Little’s assets and liabilities had fair values equal to book value, except:
  2. Land, undervalued by $40,000
  • Inventory (FIFO basis), overvalued by $20,000
  • Patents, 5 year remaining life, undervalued by $30,000
  • Bonds payable, 10 year remaining life, overvalued by $15,000 (straight-line amortization).

During 2001, Little reported earnings of $60,000, and paid dividends of $20,000.

Required:

Prepare all equity method entries for 2001

Prepare all elimination entries for 2001.


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