EBK ADVANCED FINANCIAL ACCOUNTING
11th Edition
ISBN: 8220102796096
Author: Christensen
Publisher: YUZU
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Question
Chapter 2, Problem 2.25P
a.
To determine
Introduction:
The consolidated balance sheet and the worksheets are the computed tools that are used to calculate the
To prepare: A
a.
Expert Solution
Explanation of Solution
| Particular | Dr. | Cr. |
| Equity method entry on paper’s co.’s books | ||
| Investment in scissor co. Dr. | ||
| Cash Cr. | ||
| Record initial investment in scissor co. | ||
| Investment in scissor co. Dr. | ||
| Income from scissor co. Cr. | ||
| Cash Dr. | ||
| Investment in S Cr. | ||
| Record paper co. share in scissor co. dividend | ||
| Total |
b.
To determine
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
b.
Expert Solution
Answer to Problem 2.25P
The consolidated worksheet is prepared and discussed.
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 | Paper co | Scissor co | Eliminated DR | Eliminated CR | consolidated |
| Cash | |||||
| Accounts received | |||||
| Inventory | |||||
| Investment in scissor co | |||||
| Land | |||||
| Building and equipment | |||||
| Less accumulated depreciation | |||||
| Total assets | |||||
| Account payable | |||||
| Bonds | |||||
| Common stocks | |||||
| Retained earnings | |||||
| Total liabilities |
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Instructions
At a total cost of $6,950,000, Herrera Corporation acquired 229,500 shares of Tran Corp. common stock
as a long-term investment. Herrera Corporation uses the equity method of accounting for this investment.
Tran Corp. has 850,000 shares of common stock outstanding, including the shares acquired by Herrera
Corporation.
Required:
A. Journalize the entries by Herrera Corporation on December 31 to record the following
information (refer to the Chart of Accounts for exact wording of account titles):
1. Tran Corp. reports net income of $974,000 for the current period.
2. A cash dividend of $0.28 per common share is paid by Tran Corp. during the current
period.
B. Why is the equity method appropriate for the Tran Corp. investment?
Required information
On January 1, 20X2, Power Company acquired 80 percent of Strong Company's outstanding stock for cash. The fair value
of the noncontrolling interest was equal to a proportionate share of the book value of Strong Company's net assets at the
date of acquisition. Selected balance sheet data at December 31, 20X2 are as follows:
Total Assets
Liabilities
Common Stock
Retained Earnings
Total Liabilities & Stockholders' Equity
Multiple Choice
O
$35,200
Based on the preceding information, what amount should be reported as noncontrolling interest in net assets in Power Company's December 31, 20X2, consolidated balance sheet?
$48,200
$76,800
Power
$ 564,000
O $112,800
180,000
150,000
234,000
$ 564,000
Strong
$ 216,000
65,000
80,000
96,000
$ 241,000
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 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…
Chapter 2 Solutions
EBK ADVANCED FINANCIAL ACCOUNTING
Ch. 2 - What types of investments in common stock normally...Ch. 2 - Prob. 2.2AQCh. 2 - When is equity method reporting considered...Ch. 2 - Prob. 2.4QCh. 2 - Prob. 2.5QCh. 2 - Prob. 2.6QCh. 2 - Prob. 2.7QCh. 2 - Prob. 2.8QCh. 2 - How does carrying securities at fair value...Ch. 2 - How does the fully adjusted equity method differ...
Ch. 2 - Prob. 2.11QCh. 2 - What is the modified equity method? When might a...Ch. 2 - Prob. 2.13AQCh. 2 - Prob. 2.14QCh. 2 - Prob. 2.15QCh. 2 - Prob. 2.16QCh. 2 - Prob. 2.17QCh. 2 - How are a subsidiary’s dividend declarations...Ch. 2 - Prob. 2.19QCh. 2 - Give a definition of consolidated retained...Ch. 2 - Prob. 2.21QCh. 2 - Prob. 2.22QCh. 2 - Choice of Accounting Method Slanted Building...Ch. 2 - Prob. 2.2CCh. 2 - Prob. 2.3ACCh. 2 - Prob. 2.4CCh. 2 - Prob. 2.5CCh. 2 - Prob. 2.6CCh. 2 - Prob. 2.1.1ECh. 2 - Multiple-Choice Questions on Accounting for Equity...Ch. 2 - Prob. 2.1.3ECh. 2 - Prob. 2.1.4ECh. 2 - Prob. 2.1.5ECh. 2 - Prob. 2.1.6ECh. 2 - Multiple-Choice Questions on Intercorporate...Ch. 2 - Prob. 2.2.2ECh. 2 - Prob. 2.3.1ECh. 2 - Prob. 2.3.2ECh. 2 - Prob. 2.3.3ECh. 2 - Prob. 2.3.4ECh. 2 - Cost versus Equity Reporting Winston Corporation...Ch. 2 - Prob. 2.5ECh. 2 - Prob. 2.6ECh. 2 - Prob. 2.7ECh. 2 - Income Reporting Grandview Company purchased 40...Ch. 2 - Prob. 2.9ECh. 2 - Carrying an Investment at Fair Value versus Equity...Ch. 2 - Investee with Preferred Stock Outstanding Reden...Ch. 2 - Prob. 2.12AECh. 2 - Prob. 2.13AECh. 2 - Prob. 2.14ECh. 2 - Prob. 2.15ECh. 2 - Prob. 2.16ECh. 2 - Prob. 2.17ECh. 2 - Changes ¡n the Number of Shares Held Idle...Ch. 2 - Prob. 2.19PCh. 2 - Carried at Fair Value Journal Entries Marlow...Ch. 2 - Prob. 2.21APCh. 2 - Equity-Method Income Statement Wealthy...Ch. 2 - Consolidated Worksheet at End of the First Year of...Ch. 2 - Consolidated Worksheet at End of the Second Year...Ch. 2 - Prob. 2.25PCh. 2 - Prob. 2.26PCh. 2 - Prob. 2.27BPCh. 2 - Prob. 2.28BP
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