Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 3, Problem 3.30P
Consolidated Worksheet at End of the First Year of Ownership (Equity Method)
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 $370,000.Paper uses the equity method to account for investments.
Required
a. Prepare any equity-method entry(ies) related to the investment in Scissor Company during20X8.
b. Prepare a consolidation worksheet for 20X8 in good form.
a.
Expert Solution
To determine
Introduction:
The consolidated balance sheet and the worksheets are the computed tools that are used to calculate the retained earnings and the dividend produced by the subsidiaries towards its parent company.
To prepare: A journal entry by equity method for the investment in S company in the year
Explanation of Solution
| Equity method entry onP company books | Amount ($) | Amount ($) |
| Investment in S co. Dr. | ||
| Cash Cr. | ||
| (To recordthe initial investment in S co.) | ||
| Investment in S co. Dr. | ||
| Income from S co. Cr. | ||
| (To record share of P co in S co.) | ||
| Cash Dr. | ||
| Investment in S company. Cr. | ||
| (To record P co.’s share in S Co.’s dividend) |
b.
Expert Solution
To determine
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 | |||||||
| NCI | + | P co | = | Common stock | + | Retained earnings | |
| Book value | |||||||
| Net income | |||||||
| Dividend | |||||||
| Ending book value |
| Income statement | P co | S co | Eliminated Dr. | Eliminated Cr. | Consolidated |
| Cash | |||||
| Accounts received | |||||
| Inventory | |||||
| Investment in scissor co | |||||
| Land | |||||
| Building and equipment | |||||
| Less accumulated depreciation | |||||
| Total assets | |||||
| Accountspayable | |||||
| Bonds | |||||
| Common stocks | |||||
| Retained earnings | |||||
| NCI in NA of Snoopy Co. | |||||
| Total liabilities |
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Students have asked these similar questions
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…
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…
On January 1, 20X5, Peery Company acquired 100 percent of Standard Company's common shares at underlying book value. Peery uses the equity method in accounting for its ownership of Standard. On December 31, 20X5, the trial balances of the two companies are as follows:
Item
Peery Company
Standard Company
Debit
Credit
Debit
Credit
Current Assets
$ 238,000
$ 95,000
Depreciable Assets
300,000
170,000
Investment in Standard Company
100,000
Other Expenses
90,000
70,000
Depreciation Expense
30,000
17,000
Dividends Declared
32,000
10,000
Accumulated Depreciation
$ 120,000
$ 85,000
Current Liabilities
50,000
30,000
Long-Term Debt
120,000
50,000
Common Stock
100,000
50,000
Retained Earnings
175,000
35,000
Sales
200,000
112,000
Income from Standard Company
25,000
$ 790,000
$ 790,000
$ 362,000
$ 362,000
Required:
Prepare the consolidation entries needed as of December 31, 20X5, to complete a…
Chapter 3 Solutions
Advanced Financial Accounting
Ch. 3 - What is the basic idea underlying the preparation...Ch. 3 - How might consolidated statements help an investor...Ch. 3 - Prob. 3.3QCh. 3 - Prob. 3.4QCh. 3 - Prob. 3.5QCh. 3 - Prob. 3.6QCh. 3 - Prob. 3.7QCh. 3 - Prob. 3.8QCh. 3 - Prob. 3.9QCh. 3 - Prob. 3.10Q
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