Large Ltd. purchased 70% of Small Company on January 1, Year 6, for $630,000, when the statement of financial position for Small showed common shares of $530,000 and retained earnings of $230,000. On that date, the inventory of Small was undervalued by $59,000, and a patent with an estimated remaining life of five years was overvalued by $84,000. Small reported the following subsequent to January 1, Year 6: Profit (Loss) Dividends $38,000 Year 6 Year 7 Year 8 $132,000 (48,000) 103,000 A test for goodwill impairment on December 31, Year 8, indicated a loss of $20,600 should be reported for Year 8 on the consolidate income statement. Large uses the cost method to account for its investment in Small and reported the following for Year 8 for its separate-entity statement of changes in equity: Retained earnings, beginning Profit 23,000 53,000 Dividends Retained earnings, end $ 630,000 330,000 (57,000) $903,000
Large Ltd. purchased 70% of Small Company on January 1, Year 6, for $630,000, when the statement of financial position for Small showed common shares of $530,000 and retained earnings of $230,000. On that date, the inventory of Small was undervalued by $59,000, and a patent with an estimated remaining life of five years was overvalued by $84,000. Small reported the following subsequent to January 1, Year 6: Profit (Loss) Dividends $38,000 Year 6 Year 7 Year 8 $132,000 (48,000) 103,000 A test for goodwill impairment on December 31, Year 8, indicated a loss of $20,600 should be reported for Year 8 on the consolidate income statement. Large uses the cost method to account for its investment in Small and reported the following for Year 8 for its separate-entity statement of changes in equity: Retained earnings, beginning Profit 23,000 53,000 Dividends Retained earnings, end $ 630,000 330,000 (57,000) $903,000
Chapter8: Consolidated Tax Returns
Section: Chapter Questions
Problem 25CE
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Subject: accounting
Transcribed Image Text:Large Ltd. purchased 70% of Small Company on January 1, Year 6, for $630,000, when the statement of financial position for Small
showed common shares of $530,000 and retained earnings of $230,000. On that date, the inventory of Small was undervalued by
$59,000, and a patent with an estimated remaining life of five years was overvalued by $84,000.
Small reported the following subsequent to January 1, Year 6:
Profit
(Loss) Dividends
$132,000 $38,000
(48,000) 23,000
103,000
53,000
Year 6
Year 7
Year 8
A test for goodwill impairment on December 31, Year 8, indicated a loss of $20,600 should be reported for Year 8 on the consolidated
income statement. Large uses the cost method to account for its investment in Small and reported the following for Year 8 for its
separate-entity statement of changes in equity:
Retained earnings, beginning
Profit
Dividends
Retained earnings, end
$ 630,000
330,000
(57,000)
$ 903,000
Transcribed Image Text:Year 7
No
1
2
الله
3
Date
Year 7
Year 7
Year 7
Equity method income
Investment in Small
Cash
Investment in Small
Equity method income
Investment in Small
General Journal
33
XX
Debit
33,600
16,100
16,800 X
Credit
33,600
16,100
16,800
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