On January 1, 2016, Patrick Company Purchased 60% of the Common

Essay

On January 1, 2016, Patrick Company purchased 60% of the common stock of Solomon Company for $180,000.On this date, Solomon had common stock, other paid-in capital, and retained earnings of $20,000, $60,000, and $120,000 respectively.
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On January 1, 2016, the only tangible asset of Solomon that was undervalued was land, which was worth $15,000 more than book value.
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On January 1, 2017, Patrick Company purchased an additional 30% of the common stock of Solomon Company for $140,000.
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Net income and dividends for 2 years for Solomon Company were:
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$$\begin{array} { l r r } & 2016 & 2017 \\\text { Net income for year } & \$ 50,000 & \$ 80,000 \\\text { Dividends, paid-in December } & 0 & 50,000\end{array}$$ In the last quarter of 2017, Solomon sold $80,000 of goods to Patrick, at a gross profit rate of 30%.On December 31, 2017, $20,000 of these goods are in Patrick's ending inventory.In both 2016 and 2017, Patrick has accounted for its investment in Solomon using the cost method.
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Required:
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a.Using the information above or on the separate worksheet, prepare necessary determination and distribution of excess schedules for the two purchases.