Monroe Company purchased ốf Adams Company on January 1, The purchase price paid was $600,000. On that day, the book value of Adams was $500,000. Excess of cost over book value is due to goodwill. Included in Adams's income are intercompany sales to Monroe of $40,000 with a cost to Adams of $25,000. 30% of this inventory is on hand in the Monroe inventory at December 31, 20X3. In addition, inventory sold at a profit of $5,000 was in the inventory of Monroe at December 31, 20X2. Adams reported income of $100,000 in 20X3 but paid no dividends. а. Prepare a schedule of Excess of Cost over Book Value at the date of purchase. b. For 20X3, prepare on the books of Monroe the full equity method journal entries.

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter5: The Income Statement And The Statement Of Cash Flows
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Monroe Company purchased 80% of Adams Company on January 1, 2OX1.
The purchase price paid was $600,000. On that day, the book value of Adams
was $500,000. Excess of cost over book value is due to goodwill.
Included in Adams's income are intercompany sales to Monroe of $40,000 with a cost to Adams of $25,000.
30% of this inventory is on hand in the Monroe inventory at December 31, 20X3. In addition, inventory
sold at a profit of $5,000 was in the inventory of Monroe at December 31, 20X2.
Adams reported income of $100,000 in 20x3 but paid no dividends.
а.
Prepare a schedule of Excess of Cost over Book Value at the date of purchase.
b.
For 20X3, prepare on the books of Monroe the full equity method journal entries.
Dr.
Cr.
Transcribed Image Text:Monroe Company purchased 80% of Adams Company on January 1, 2OX1. The purchase price paid was $600,000. On that day, the book value of Adams was $500,000. Excess of cost over book value is due to goodwill. Included in Adams's income are intercompany sales to Monroe of $40,000 with a cost to Adams of $25,000. 30% of this inventory is on hand in the Monroe inventory at December 31, 20X3. In addition, inventory sold at a profit of $5,000 was in the inventory of Monroe at December 31, 20X2. Adams reported income of $100,000 in 20x3 but paid no dividends. а. Prepare a schedule of Excess of Cost over Book Value at the date of purchase. b. For 20X3, prepare on the books of Monroe the full equity method journal entries. Dr. Cr.
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