1. Prescott Company buys 70% of Sound Inc. on January 1, 2022. At the date of acquisition, it is determined that Sound has unrecorded patent with fair value of $30,000, an estimated life of 8 years and straight-line amortization. On the consolidated balance sheet at December 31, 2023, at what value is the patent reported? a. $21,000 b. $18,750 c. $26,250 d. $22,500 2. On consolidated financial statements, where does the parents equity in the net income of the subsidiary account appear? a. On the consolidated income statement, as a deduction from income b. On the consolidated income statement, as a revenue c. Does not appear on the consolidated financial statements d. On the consolidated balance sheet, as an equity 3. On January 1, 2022, Paulson Corporation purchased 65% of the outstanding common stock of Sun Company, which became a subsidiary of Paulson. No goodwill was reported on this acquisition. Differences between book value and fair value of the net identifiable assets of Sun Company on January 1, 2022, were limited to the following: Book value Fair value Inventories (FIFO) $ 19,000 $ 18,500 Building (net) [remaining life: 5 years; straight-line depreciation; no salvage value] 45,000 40,000 Suns cost of goods sold was $38,000 in 2022. Sun reported an income of 20,000 in 2023. The noncontrolling interest in net income for the year ended December 31, 2023 (second year after business combination) was a. $7,350 b. $7,175 c. $6,825 d. $6,650 4. On January 1, 2023, Pantop Corporation acquired 85% of the outstanding common stock of Song Company for $578,000. There was no control premium. The following information about Song Company on January 1, 2023 was available: Book value Fair value Cash 193,000 193,000 Inventory 40,000 39,400 Building 180,000 200,000 Total 413,000 432,400 Accounts Payable 3,000 3,000 Common Stock 200,000 Add. Paid-in Capital 110,000 Retained Earnings 100,000 Total 413,000 Pantop uses the complete equity method to account for its investment in Song. During 2023, Song had a net income of $72,000. The remaining useful life of the building was five years with no salvage value. Song uses straight line depreciation. Songs cost of goods sold (FIFO) was $50,000 in 2023. On December 23, 2023, Song declared and paid $48,000 cash dividend to its shareholders. Goodwill was unimpaired as of December 31, 2023. (i) Prepare journal entries for Pantop to record under the complete equity method of accounting the operating results of Song in 2023. (ii) Prepare the working paper eliminating entries C, E, R, O and N (in journal entry format) for Pantop Corporation and subsidiary for the year ended December 31, 2023..

1. 1. Prescott Company buys 70% of Sound Inc. on January 1, 2022. At the date of acquisition, it is
determined that Sound has unrecorded patent with fair value of $30,000, an estimated life of 8
years and straight-line amortization. On the consolidated balance sheet at December 31, 2023, at
what value is the patent reported? a. $21,000 b. $18,750 c. $26,250 d. $22,500
2. On consolidated financial statements, where does the parents equity in the net income of the
subsidiary account appear? a. On the consolidated income statement, as a deduction from income
b. On the consolidated income statement, as a revenue c. Does not appear on the consolidated
financial statements d. On the consolidated balance sheet, as an equity
3. On January 1, 2022, Paulson Corporation purchased 65% of the outstanding common stock of
Sun Company, which became a subsidiary of Paulson. No goodwill was reported on this
acquisition. Differences between book value and fair value of the net identifiable assets of Sun
Company on January 1, 2022, were limited to the following: Book value Fair value Inventories
(FIFO) $ 19,000 $ 18,500 Building (net) [remaining life: 5 years; straight-line depreciation; no
salvage value] 45,000 40,000 Suns cost of goods sold was $38,000 in 2022. Sun reported an
income of 20,000 in 2023. The noncontrolling interest in net income for the year ended December
31, 2023 (second year after business combination) was a. $7,350 b. $7,175 c. $6,825 d. $6,650
4. On January 1, 2023, Pantop Corporation acquired 85% of the outstanding common stock of
Song Company for $578,000. There was no control premium. The following information about
Song Company on January 1, 2023 was available: Book value Fair value Cash 193,000 193,000
Inventory 40,000 39,400 Building 180,000 200,000 Total 413,000 432,400 Accounts Payable
3,000 3,000 Common Stock 200,000 Add. Paid-in Capital 110,000 Retained Earnings 100,000
Total 413,000 Pantop uses the complete equity method to account for its investment in Song.
During 2023, Song had a net income of $72,000. The remaining useful life of the building was five
years with no salvage value. Song uses straight line depreciation. Songs cost of goods sold
(FIFO) was $50,000 in 2023. On December 23, 2023, Song declared and paid $48,000 cash
dividend to its shareholders. Goodwill was unimpaired as of December 31, 2023. (i) Prepare
journal entries for Pantop to record under the complete equity method of accounting the operating
results of Song in 2023. (ii) Prepare the working paper eliminating entries C, E, R, O and N (in
journal entry format) for Pantop Corporation and subsidiary for the year ended December 31,
2023.