Question

Palermo Inc. purchased 80 percent of the outstanding stock of Salina Ranching Company, located in Australia, on January 1, 20X3. The purchase price in Australian dollars (A$) was A$200,000, and A$40,000 of the differential was allocated to plant and equipment, which is amortized over a 10-year period. The remainder of the differential was attributable to a patent. Palermo Inc. amortizes the patent over 10 years. Salina Ranching’s trial balance on December 31, 20X3, in Australian dollars is as follows:

Same as all other Palermo Inc. questions here on Chegg.

Required:
a. Prepare a set of consolidating entries, in general journal form, for the entries required to prepare a comprehensive consolidation worksheet (including other comprehensive income) as of December 31, 20X3.

1. Record the basic consolidation entry.
2. Record the other comprehensive income entry.
3. Record the amortized excess value reclassification entry.
4. Record the excess value (differential) reclassification entry.
5. Record the entry to eliminate the intercompany accounts.

b. Prepare a comprehensive consolidation worksheet as of December 31, 20X3. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)

Answer 1