On January 1, 2010, Jones Company bought 15% of Whitton Company. Jones paid $150,000 for these shares, an amount that exactly equaled the proportionate book value of Whitton. On January 1, 2011, Whitton acquired 80% ownership of Jones. The following data are available concerning Whitton's acquisition of Jones: Excess fair value over book value (assigned to trademarks) is amortized over 20 years. The initial value method is used by both companies.
The following information is available regarding Jones and Whitton: What would be included in a consolidation worksheet entry for 2011?

Question

On January 1, 2010, Jones Company bought 15% of Whitton Company. Jones paid $150,000 for these shares, an amount that exactly equaled the proportionate book value of Whitton. On January 1, 2011, Whitton acquired 80% ownership of Jones. The following data are available concerning Whitton's acquisition of Jones:  Excess fair value over book value (assigned to trademarks) is amortized over 20 years. The initial value method is used by both companies.
The following information is available regarding Jones and Whitton:  What would be included in a consolidation worksheet entry for 2011?

Quizplus · Accepted Answer

When Whitton acquires 80% ownership of Jones, any excess fair value over book value is allocated to goodwill. Since the initial value method is used by both companies, the carrying amount of Jones on Whitton's books should be equal to the initial purchase price of $150,000. Therefore, in the consolidation worksheet entry for 2011, the treasury stock account should be debited for $150,000 to eliminate the intercompany ownership of Jones' shares.

On January 1, 2010, Jones Company Bought 15% of Whitton