Pillow Corporation acquired 80 percent ownership of SheetCompany on January 1, 20X7, for $173,000. At that date, the fairvalue of the noncontrolling interest was $43,250. The trialbalances for the two companies on December 31, 20X7, included thefollowing amounts:
| Pillow Corporation | | Sheet Company |
| Item | Debit | Credit | | Debit | Credit |
| Cash | | $ | 38,000 | | | | | | | | $ | 25,000 | | | | | |
| Accounts Receivable | | | 50,000 | | | | | | | | | 55,000 | | | | | |
| Inventory | | | 240,000 | | | | | | | | | 100,000 | | | | | |
| Land | | | 80,000 | | | | | | | | | 20,000 | | | | | |
| Buildings & Equipment | | | 500,000 | | | | | | | | | 150,000 | | | | | |
| Investment in Sheet Company | | | 202,000 | | | | | | | | | | | | | | |
| Cost of Goods Sold | | | 500,000 | | | | | | | | | 250,000 | | | | | |
| Depreciation Expense | | | 25,000 | | | | | | | | | 15,000 | | | | | |
| Other Expenses | | | 75,000 | | | | | | | | | 75,000 | | | | | |
| Dividends Declared | | | 50,000 | | | | | | | | | 20,000 | | | | | |
| Accumulated Depreciation | | | | | | $ | 155,000 | | | | | | | | $ | 75,000 | |
| Accounts Payable | | | | | | | 70,000 | | | | | | | | | 35,000 | |
| Mortgages Payable | | | | | | | 200,000 | | | | | | | | | 50,000 | |
| Common Stock | | | | | | | 300,000 | | | | | | | | | 50,000 | |
| Retained Earnings | | | | | | | 290,000 | | | | | | | | | 100,000 | |
| Sales | | | | | | | 700,000 | | | | | | | | | 400,000 | |
| Income from Sheet Company | | | | | | | 45,000 | | | | | | | | | | |
| | $ | 1,760,000 | | | $ | 1,760,000 | | | | $ | 710,000 | | | $ | 710,000 | |
|
Additional Information
- On January 1, 20X7, Sheet reported net assets with a book valueof $150,000 and a fair value of $191,250. Accumulated depreciationon Buildings and Equipment was $60,000 on the acquisitiondate.
- Sheet’s depreciable assets had an estimated economic life of 11years on the date of combination. Goodwill of $25,000 was recordedat the acquisition.
- Pillow used the equity method in accounting for its investmentin Sheet.
- Detailed analysis of receivables and payables showed that Sheetowed Pillow $16,000 on December 31, 20X7.
a. Prepare all journal entries recorded by Pillow with regard toits investment in Sheet during 20X7.Record the initial investmentin Sheet Company
Record the initial investment in Sheet Company
B
Record Pillow Corporation's 80% share of Sheet Company's 20X7income.
C
Record Pillow Corporation's 80% share of Sheet Company's 20X7dividend.
D
Record the amortization of the excess acquisition price.
