Pommu Corporation Paid $78,000 for a 60% Interest in Schtick

Essay

Pommu Corporation paid $78,000 for a 60% interest in Schtick Inc. on January 1, 2014, when Schtick's Capital Stock was $80,000 and its Retained Earnings $20,000. The fair values of Schtick's identifiable assets and liabilities were the same as the recorded book values on the acquisition date. Trial balances at the end of the year on December 31, 2014 are given below:
During 2014, Pommu made only two journal entries with respect to its investment in Schtick. On January 1, 2014, it debited the Investment in Schtick account for $78,000 and on November 1, 2014, it credited Dividend Income for $6,000.
Required:
1. Prepare a consolidated income statement and a statement of retained earnings for Pommu and Subsidiary for the year ended December 31, 2014.
2. Prepare a consolidated balance sheet for Pommu and Subsidiary as of December 31, 2014.