Homework answers / question archive / Punk Corporation purchased 90 percent of Soul Company's voting common shares on January 1, 20X2, at underlying book value

Punk Corporation purchased 90 percent of Soul Company's voting common shares on January 1, 20X2, at underlying book value

Accounting

Share With

Punk Corporation purchased 90 percent of Soul Company's voting common shares on January 1, 20X2, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 10 percent of the book value of Soul Company. Punk also purchased $94,000 of 6 percent, five-year bonds directly from Soul on January 1, 20X2, for $98,000. The bonds pay interest annually on December 31. The trial balances of the companies as of December 31, 20X4, are as follows: 
Soul Company Item Punk Corporation Debit Credit Debit Credit Cash & Receivables $ 26,000 $ 40,600 Inventory 174,000 78,000 Buildings & Equipment 418,000 245,000 Investment in Soul Company Stock 125,424 Investment in Soul Company Bonds 95,600 Cost of Goods Sold 80,000 73,800 Depreciation Expense 18,000 13,000 Interest Expense 15,640 4,840 Dividends Declared 28,000 18,000 Accumulated Depreciation $136,000 $ 76,000 Current Payables 112,200 52,640 Bonds Payable 194,000 94,000 Bond Premium 1,600 Common Stock 110,000 70,000 Retained Earnings 227,000 40,000 Sales 154,000 139,000 Interest Income 4,840 Income from Soul Company Stock 42,624 Total $980,664 $980,664 $473,240 $473,240