Question

Priya Corporation acquired 100 percent of Sheldon Company stock on January 1, 2019 for $649,000 cash. Following are pre-closing trial balance amounts for Priya Corporation and Sheldon Company as of December 31, 2019: PRIYA Debit CORPORATION Credit CORPORATION Credit SHELDON Debit $211,800 141,600 162,000 Cash Accounts Receivable Inventory Investment in Sheldon Corp. Buildings Land Equipment Cost of Goods Sold Depreciation Expense, Building Depreciation Expense, Equipment Selling & Administrative Expense Dividends Declared Accumulated Depreciation, Bldg Accumulated Depreciation, Equip Accounts Payable Bonds Payable Common Stock ($1 par) Additional Paid In Capital Retained Earnings (01/01/2019) Sales Income from Sheldon Corp. $804,600 294,000 473,000 753,600 636,000 790,000 531,000 382,000 63,600 53,100 193,400 60,000 346,000 225,000 247,000 176,000 16,800 31,200 115,400 40,000 $190,800 318,600 178,000 500,000 600,000 1,482,700 809,000 810,600 144,600 $5,034,300 $117,600 187,200 165,800 109,200 210,000 175,000 264,000 484,000 $5,034,300 $1,712,800 $1,712,800

Answer 1

	a. Investment Analysis
	Fair Value of consideration given from Priya Company's investment to Sheldon's shareholders	$        649,000
	Book Value of Sheldon Company's Net identifiable assets	$     (649,000)
	Common stock	$        210,000
	Additional paid in capital	$        175,000
	Retained Earnings	$        264,000
	Differential (if any)	$                   -
	b. Journal entries in the books of Priya
Date	Account Title	Debit	Credit
1-Jan-19	Investment in Sheldon Corp	$        649,000
	Cash		$        649,000
	(Being acquisition of Sheldon Corp)
31-Dec-19	Investment in Sheldon Corp	$        104,600
	To Income from Sheldon Corp		$        104,600
	(Being increase in investment value accounted)
31-Dec-19	Cash	$          40,000
	Income from Sheldon Corp		$          40,000
	(Being dividend income accounted)
c	Priya Company's Ledger
	Investment in Sheldon
Date	Account Title	Debit	Date	Account Title	Credit
1-Jan-19	cash	$        649,000	31-Dec-19	By bal c.f	$        753,600
31-Dec-19	Income from Sheldon	$        104,600
		$        753,600			$        753,600
	Income from Sheldon
Date	Account Title	Debit	Date	Account Title	Credit
31-Dec-19	To bal c.f	$        144,600	31-Dec-19	Investment in sheldon	$        104,600
			31-Dec-19	cash	$          40,000
		$        144,600			$        144,600
d.	Consolidation worksheet entries
Date	Account Title	Debit	Credit
31-Dec-19	Cash	$        211,800
	Accounts Receivable	$        141,600
	Inventory	$        162,000
	Buildings	$        346,000
	Land	$        225,000
	Equipment	$        247,000
	Acc dep - building		$        117,600
	Acc dep - equipment		$        187,200
	Accounts payable		$        165,800
	bonds payable		$        109,200
	Investment in Sheldon		$        753,600
	(being consolidation entry)
31-Dec-19	Income from sheldon	$          40,000
	dividend declared		$          40,000
	(elimination of inter company dividend)
31-Dec-19	net income from Sheldon Corp	$        144,600
	Retained Earnings		$        144,600
	(being transfer of net income from Sheldon Corp to retained earnings of Priya)