2- The consolidated balance sheet of Porto Corporation and Said Farm, its 80% owned subsidiary,...
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Accounting
2- The consolidated balance sheet of Porto Corporation and Said Farm, its 80% owned subsidiary, as of December 31, 2021, contains the following accounts and balances:
Porto Corporation and Subsidiary
Consolidated Balance Sheet
at December 31, 2021
Balances
Cash $57,000
Accounts receivable-net 210,000
Inventories 330,000
Other current assets 255,000
Plant assets-net 870,000
Goodwill from consolidation 117,000
$1,839,000
Accounts payable $219,000
Other liabilities 210,000
Capital stock 1,050,000
Retained earnings 240,000
Noncontrolling interest 120,000
$1,839,000
Porto Corporation acquired its interest in Said Farm on January 1, 2021, when Said Farm had $450,000 of Capital Stock and $210,000 of Retained Earnings. Said Farm's net assets had fair values equal to their book values when Porto acquired its interest. No changes have occurred in the amount of outstanding stock since the date of the business combination. Porto uses the equity method of accounting for its investment.
Required: Calculate the following amounts:
1. The balance of Porto's Capital Stock and Retained Earnings accounts at December 31, 2021. Explain your answer.
2. Cost of Porto's purchase of Said Farm on January 1, 2021. (5 Marks)
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