Ch2(3)

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University of Houston, Downtown *

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6315

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Accounting

Date

Apr 3, 2024

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pdf

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3/28/24, 9:44 PM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcmlud… 2/3 1. Award: 25 out of 25.00 points Amber Corporation reported the following summarized balance sheet data on December 31, 20X6: Assets $ 600,000 Liabilities $ 100,000 Common Stock 300,000 Retained Earnings 200,000 Total $ 600,000 Total $ 600,000 On January 1, 20X7, Purple Company acquired 100 percent of Amber’s stock for $500,000. At the acquisition date, the book values and fair values of Amber’s assets and liabilities were equal. Amber reported net income of $50,000 for 20X7 and paid dividends of $20,000. Required: a. Give the journal entries recorded by Purple on its books during 20X7 if it accounts for its investment in Amber using the equity method. b. Give the consolidation entries needed on December 31, 20X7, to prepare consolidated financial statements. Required A Required B Complete this question by entering your answers in the tabs below. Give the journal entries recorded by Purple on its books during 20X7 if it accounts for its investment in Amber using the equity method. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Required A Required B No Event General Journal Debit Credit A 1 Investment in Amber Corporation 500,000 Cash 500,000 B 2 Investment in Amber Corporation 50,000 Income from Amber Corporation 50,000 C 3 Cash 20,000 Investment in Amber Corporation 20,000 References Consolidating Entries Learning Objective: 02-03 Prepare journal entries for investments using the equity method. Difficulty: 2 Medium Learning Objective: 02-06 Prepare a consolidation worksheet. Amber Corporation reported the following summarized balance sheet data on December 31, 20X6: Assets $ 600,000 Liabilities $ 100,000 Common Stock 300,000 Retained Earnings 200,000 Total $ 600,000 Total $ 600,000 On January 1, 20X7, Purple Company acquired 100 percent of Amber’s stock for $500,000. At the acquisition date, the book values and fair values of Amber’s assets and liabilities were equal. Amber reported net income of $50,000 for 20X7 and paid dividends of $20,000. Required: a. Give the journal entries recorded by Purple on its books during 20X7 if it accounts for its investment in Amber using the equity method. b. Give the consolidation entries needed on December 31, 20X7, to prepare consolidated financial statements.

3/28/24, 9:44 PM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcmlud… 3/3 Required A Required B Complete this question by entering your answers in the tabs below. Give the journal entries recorded by Purple on its books during 20X7 if it accounts for its investment in Amber using the equity method. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Required A Required B No Event General Journal Debit Credit A 1 Investment in Amber Corporation 500,000 Cash 500,000 B 2 Investment in Amber Corporation 50,000 Income from Amber Corporation 50,000 C 3 Cash 20,000 Investment in Amber Corporation 20,000 Explanation: b. Book Value Calculations: Total Book Value = Common Stock + Retained Earnings Original book value 500,000 300,000 200,000 + Net Income 50,000 50,000 − Dividends (20,000) (20,000) Ending book value 530,000 300,000 230,000 Investment in Amber Corporation Debit Credit Acquisition Price 500,000 Net Income 50,000 20,000 Dividends Ending Balance 530,000 530,000 Basic Entries 0 Income from Amber Corporation Debit Credit 50,000 Net Income 50,000 Ending Balance Basic Entries 50,000 0 1/1/X7 12/31/X7 Goodwill = 0 $500,000 Initial investment in Amber Corporation Goodwill = 0 $530,000 Net investment in Amber Corporati Identifiable excess = 0 Identifiable excess = 0 Book value = CS + RE = 500,000 Book value = CS + RE = 530,000

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