Concept explainers
Consolidated Worksheet at End of the First Year of Ownership (Equity Method)
Peanut Company acquired 100 percent of Snoopy Company’s outstanding common stock for
$300,000 on January 1, 20X8, when the book value of Snoopy’s net assets was equal to $300,000.
Peanut uses the equity method to account for investments.
Required
a. Prepare the
b. Prepare a consolidation worksheet for 20X8 in good form.
a.
Introduction:
The consolidated balance sheet and the worksheets are the computed tools that are used to calculate the retained earnings and the dividend produced by the subsidiaries towards its parent company.
To prepare: A journal entry by equity method for the investment in S company in the year
Answer to Problem 2.21P
The journal entry so passed gives a debit of investment and credit the cash with the same amount.
Explanation of Solution
Particular | Debit | Credit |
Equity method entry on books | ||
Investment in S co. | ||
Cash | ||
(Record P co. share of the S co. income) | ||
Cash | ||
Investment in the S co. | ||
(Record P co. share in S co. dividend) | ||
Investment in S | 75000 | |
Income from S | 75000 | |
(To record P share in S income ) |
b.
Concept introduction
The consolidated balance sheet and the worksheets are the computed tools that are used to calculate the retained earnings and the dividend produced by the subsidiaries towards its parent company.
To prepare: The consolidated worksheet for the final values
Explanation of Solution
Book value calculation | |||||
Total book value | = | Common stock | + | Retained earnings | |
Book value | |||||
Net income | |||||
Dividend | |||||
Ending book value |
Income statement | P | S | Dr. | Cr. | consolidated |
Sales | |||||
Less Cogs | |||||
Depreciation Exp | |||||
Sel. Exp | |||||
Income | |||||
Net income |
Statement of Retain Earning | P | S | Dr. | Cr. | Consolidated |
Opening balance | |||||
Net income | |||||
Less dividend declared | |||||
End balance |
Income statement | P co | S co | Eliminated DR | Eliminated CR | consolidated |
Cash | |||||
Accounts received | |||||
Inventory | |||||
Investment in S co | |||||
Land | |||||
Building and equipment | |||||
Less accumulated depreciation | |||||
Total assets | |||||
Account payable | |||||
Bonds | |||||
Common stocks | |||||
Retained earnings | |||||
Total liabilities |
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Chapter 2 Solutions
ADVANCED FINANCIAL ACCOUNTING-ACCESS
- Peanut Company acquired 100 percent of Snoopy Company’s outstanding common stock for $300,000 on January 1, 20X8, when the book value of Snoopy’s net assets was equal to $300,000. Peanut uses the equity method to account for investments. Trial balance data for Peanut and Snoopy as of December 31, 20X8, are as follows: Peanut Company Snoopy Company Debit Credit Debit Credit Cash $ 130,000 $ 80,000 Accounts Receivable 165,000 65,000 Inventory 200,000 75,000 Investment in Snoopy Company 355,000 0 Land 200,000 100,000 Buildings and Equipment 700,000 200,000 Cost of Goods Sold 200,000 125,000 Depreciation Expense 50,000 10,000 Selling and Administrative Expense 225,000 40,000 Dividends Declared 100,000 20,000 Accumulated Depreciation $ 450,000 $ 20,000 Accounts Payable 75,000 60,000 Bonds Payable 200,000 85,000 Common Stock 500,000 200,000 Retained Earnings 225,000 100,000 Sales 800,000…arrow_forwardPeanut Company acquired 80 percent of Snoopy Company's outstanding common stock for $300,000 on January 1, 20X8, when the book value of Snoopy's net assets was equal to $375,000. Peanut uses the equity method to account for investments. The following trial balance summarizes the financial position and operations for Peanut and Snoopy as of December 31, 20X9 Snoopy Company Cash Accounts Receivable Inventory Investment in Snoopy Company Land Buildings and Equipment Cost of Goods Sold Depreciation Expense Selling & Administrative Expense Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Common Stock Retained Earnings Sales Income from Snoopy Company Total Peanut Company Debit $ 270,000 191,000 196,000 315,000 207,000 714,000 375,000 46,000 225,000 213,000 $2,752,000 Credit $494,000 56,000 133,000 493,000 656,600 842,000 77,400 $ 2,752,000 Debit $ 85,000 90,000 100,000 0 96,000 181,000 169,000 12,000 35,250 38,000 $ 806,250 Required: a. Prepare any equity method…arrow_forwardPeanut Company acquired 90 percent of Snoopy Company’s outstanding common stock for $270,000 on January 1, 20X8, when the book value of Snoopy’s net assets was equal to $300,000. Peanut uses the equity method to account for investments. Trial balance data for Peanut and Snoopy as of December 31, 20X8, follow: Peanut Company Snoopy Company Debit Credit Debit Credit Cash $ 158,000 $ 80,000 Accounts Receivable 165,000 65,000 Inventory 200,000 75,000 Investment in Snoopy Company 319,500 0 Land 200,000 100,000 Buildings and Equipment 700,000 200,000 Cost of Goods Sold 200,000 125,000 Depreciation Expense 50,000 10,000 Selling & Administrative Expense 225,000 40,000 Dividends Declared 100,000 20,000 Accumulated Depreciation $ 450,000 $ 20,000 Accounts Payable 75,000 60,000 Bonds Payable 200,000 85,000 Common Stock 500,000 200,000 Retained Earnings 225,000 100,000 Sales 800,000 250,000…arrow_forward
- Peanut Company acquired 90 percent of Snoopy Company’s outstanding common stock for $270,000 on January 1, 20X8, when the book value of Snoopy’s net assets was equal to $300,000. Peanut uses the equity method to account for investments. Trial balance data for Peanut and Snoopy as of December 31, 20X8, follow: Peanut Company Snoopy Company Debit Credit Debit Credit Cash $ 158,000 $ 80,000 Accounts Receivable 165,000 65,000 Inventory 200,000 75,000 Investment in Snoopy Company 319,500 0 Land 200,000 100,000 Buildings and Equipment 700,000 200,000 Cost of Goods Sold 200,000 125,000 Depreciation Expense 50,000 10,000 Selling & Administrative Expense 225,000 40,000 Dividends Declared 100,000 20,000 Accumulated Depreciation $ 450,000 $ 20,000 Accounts Payable 75,000 60,000 Bonds Payable 200,000 85,000 Common Stock 500,000 200,000 Retained Earnings 225,000 100,000 Sales 800,000 250,000…arrow_forwardAlmond acquires 80% of the share capital of Cashew on 1 August 20X6 and is preparing its group financial statements for the year ended 31 December 20X6. How will Cashew's results be included in the consolidated statement of financial position at 31 December 20X6? a. 80% of Cashew's assets and liabilities, time apportioned for the 4 months from 1 August 20X6 to 31 December 20X6 b. 80% of Cashew's assets and liabilities at 31 December 20X6 C. 100% of Cashew's assets and liabilities at 31 December 20X6 С. d. 100% of Cashew's assets and liabilities, time apportioned for the 4 months from 1 August 20X6 to 31 December 20X6arrow_forward4 Peanut Company acquired 80 percent of Snoopy Company's outstanding common stock for $300,000 on January 1, 20X8, when the book value of Snoopy's net assets was equal to $375,000. Peanut uses the eguity method to account for Investments. The following trial balance summarizes the financial position and operations for Peanut and Snoopy as of December 31, 20X9: Peanut Company Snoopy Company Credit Debit Credit Debit $ 272,000 $ 77,000 82, 000 Cash Accounts Receivable 200, eee Inventory 193,e00 319,800 216,e00 706,000 118,000 Investment in Snoopy Company Land 81,000 Buildings and Equipment 199, 000 155,000 13,000 54, 250 34,000 Cost of Goods Sold 375,000 Depreciation Expense Selling & Administrative Expense Dividends Declared 47,000 221,000 224,e00 $ 487,000 $ 39,e00 Accumulated Depreciation Accounts Payable Bonds Payable 55,000 39,e00 137,000 79,250 Common Stock Retained Earnings 491,000 682,400 187,e00 158,eee 319, e00 Sales 844,000 Income from Snoopy Company 77,400 Total $2,773,800…arrow_forward
- NEED JOURNAL ENTRIES ONLY FOR BOTH PLEASE Like S, A, I, etc. Prime Company acquired 75%of the common stock of Second Company January 1, year one, for $450,000 The consideration given was proportional to Second's fair value. On that date, Second had the following trial balance: account debit credit Additional paid in capital $100,000 Building (12-year life) $250,000 Common stock 170,000 Current assets 170,000 Equipment (6-yr life) 160,000 Land 110,000 Liabilities (due in 4 years) 300,000 Retained earnings 1/year 1 120,000Totals $690,000 $690,000 During year one, Second reported net income of $60,000 During year one, Sonny paid dividends of $30,000 During year two, Second reported net income of $80,000 During year two, Sonny paid dividends of $40,000 On January 1, year one, fair values were: Land $146,000 Building $262,000 Equipment $184,000There was no impairment of any goodwill arising from the acquisition.Please indicate clearly which method you choose for Prime to use to account for…arrow_forwardPeanut Company acquired 90 percent of Snoopy Company's outstanding common stock for $321,300 on January 1, 20X8, when the book value of Snoopy's net assets was equal to $357,000. Peanut uses the equity method to account for investments. Trial balance data for Peanut and Snoopy as of January 1, 20X8, follow: Assets Cash Accounts Receivable Inventory Investment in Snoopy Company Land Buildings and Equipment Accumulated Depreciation Total Assets Liabilities and Stockholders' Equity Accounts Payable Bonds Payable Common Stock Retained Earnings Total Liabilities and Equity Peanut Company Snoopy Company $ 24,000 34,000 72,000 $ 71,000 66,000 117,000 321,300 231,000 719,000 (392,000) $ 1,133,300 $ 66,000 195,000 481,000 391,300 $ 1,133,300 113,000 210,000 (8,000) $ 445,000 $ 22,000 66,000 195,000 162,000 $ 445,000 Required: a. Prepare the journal entry on Peanut's books for the acquisition of Snoopy on January 1, 20X8. b. Prepare a consolidation worksheet on the acquisition date, January 1,…arrow_forwardP Inc. purchased 81% of the voting shares of S Inc for $696,143 cash on January 1, year 2. P recorded Investment in S at cost. The Balance Sheet of P Inc. & S Inc. for year 5 showed the following balances P Inc. S Inc. Investment $696,143 $90,653 What is the amount for Investment on Consolidated Balance Sheet of P Inc. for year5?arrow_forward
- Paper Company acquired 80 percent of Scissor Company’s outstanding common stock for $296,000 on January 1, 20X8, when the book value of Scissor’s net assets was equal to $370,000. Paper uses the equity method to account for investments. Trial balance data for Paper and Scissor as of December 31, 20X8, are as follows: Paper Company Scissor Company Debit Credit Debit Credit Cash $ 191,000 $ 46,000 Accounts Receivable 140,000 60,000 Inventory 190,000 120,000 Investment in Scissor Company 350,400 0 Land 250,000 125,000 Buildings and Equipment 875,000 250,000 Cost of Goods Sold 250,000 155,000 Depreciation Expense 65,000 12,000 Selling & Administrative Expense 280,000 50,000 Dividends Declared 80,000 25,000 Accumulated Depreciation $ 565,000 $ 36,000 Accounts Payable 77,000 27,000 Bonds Payable 250,000 100,000 Common Stock 625,000 250,000 Retained Earnings 280,000 120,000 Sales 800,000…arrow_forwardPaper Company acquired 80 percent of Scissor Company’s outstanding common stock for $296,000 on January 1, 20X8, when the book value of Scissor’s net assets was equal to $370,000. Paper uses the equity method to account for investments. Trial balance data for Paper and Scissor as of December 31, 20X8, are as follows: Paper Company Scissor Company Debit Credit Debit Credit Cash $ 191,000 $ 46,000 Accounts Receivable 140,000 60,000 Inventory 190,000 120,000 Investment in Scissor Company 350,400 0 Land 250,000 125,000 Buildings and Equipment 875,000 250,000 Cost of Goods Sold 250,000 155,000 Depreciation Expense 65,000 12,000 Selling & Administrative Expense 280,000 50,000 Dividends Declared 80,000 25,000 Accumulated Depreciation $ 565,000 $ 36,000 Accounts Payable 77,000 27,000 Bonds Payable 250,000 100,000 Common Stock 625,000 250,000 Retained Earnings 280,000 120,000 Sales 800,000…arrow_forwardPeanut Company acquired 80 percent of Snoopy Company's outstanding common stock for $260,000 on January 1, 20X8, when the book value of Snoopy's net assets was equal to $325,000. Peanut uses the equity method to account for investments. The following trial balance summarizes the financial position and operations for Peanut and Snoopy as of December 31, 20X9: Cash Accounts Receivable Inventory Investment in Snoopy Company Land Buildings and Equipment Cost of Goods Sold Depreciation Expense Selling & Administrative Expense Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Common Stock Retained Earnings Sales Income from Snoopy Company Total Peanut Company Debit $ 264,000 204,000 184,000 325,600 213,000 719,000 325,000 42,000 214,000 214,000 $ 2,704,600 Credit $ 491,000 59,000 131,000 499,000 609,400 836,000 79,200 $ 2,704,600 Debit Snoopy Company $ 82,000 87,000 102,000 0 88,000 195,000 161,000 15,000 38,000 33,000 $ 801,000 Required: a. Prepare any equity method…arrow_forward