ADVANCED FINANCIAL ACCOUNTING-ACCESS
12th Edition
ISBN: 9781260518740
Author: Christensen
Publisher: MCG
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Chapter 4, Problem 4.29P
(a)
To determine
Introduction: Journal entries is a systematic method of recording transactions as and when they occur. It is a summary of transactions divided into the debit and credit items that are recorded chronologically. It is an act of keeping and recording all the transactions occurring in the business.
Journal entries needed for investment in S during 20X4.
(a)
Expert Solution
Explanation of Solution
Journal entries (equity method)
| S. No. | Particulars | Amount (in $) | Amount (in$) |
| 1 | Investment in S | 32,000 | |
| Income from S | 32,000 | ||
| (Being acquisition entry passed) | |||
| 2 | Cash | 12,000 | |
| Investment in S | 12,000 | ||
| (Being dividend entry passed) | |||
| 3 | Income from S | 4,000 | |
| Investment in S | 4,000 | ||
| (Being amortization of excess acquired price) |
- Recording the P’s 100% share acquisition in S
- Recording the dividend received
- Recording amortization of excess acquisition price
(b)
To determine
Introduction: Journal entries is a systematic method of recording transactions as and when they occur. It is a summary of transactions divided into the debit and credit items that are recorded chronologically. It is an act of keeping and recording all the transactions occurring in the business.
Journal entries needed to prepare consolidated financial statements for 20X4.
(b)
Expert Solution
Explanation of Solution
| S.no | Particulars | Amount $ | Amount $ |
| 1 | Common stock-S | 100,000 | |
| Retained earnings | 120,000 | ||
| Income from S | 32,000 | ||
| Dividends declared | 12,000 | ||
| Investment in S | 240,000 | ||
| (Being entry for investment and dividend declared recognized) | |||
| 2 | Buildings an equipment | 40,000 | |
| | 8,000 | ||
| Income from S | 32,000 | ||
| (Being income from S recognized to building and equipment) | |||
| 3 | Depreciation expense | 4,000 | |
| Accumulated depreciation | 100,000 | ||
| (Being excess amount charged as depreciation on yearly basis for 10 years) | 120,000 | ||
| 4 | Accounts payable | 32,000 | |
| Accounts receivable | 12,000 | ||
| (Being amount due by S to P recognized) | 240,000 |
- Recording the eliminating entry for investment in S and the beginning investment
- Assigning income from S to building and equipment
- Recording amortization of differential
- Recording the elimination of intercorporate receivables and payables
(c)
To determine
Introduction: A consolidated worksheet is used to prepare the consolidated financial statements of the parent company and its subsidiary. It reflects the individual values of the parent and the subsidiary and then one consolidated figure for both the entities.
Three part consolidation worksheet for 20X4
(c)
Expert Solution
Answer to Problem 4.29P
The consolidated net income is $76,000
The consolidated retained earnings as on December 31, 20X4 is $338,000
The total consolidated assets are $926,500
The total consolidated liabilities and equities are $926,500
Explanation of Solution
Consolidated Worksheet as on December 31, 20X4
| Particulars | P $ | S $ | Eliminations | Consolidated $ | |
| Income statement | Debit (in $) | Credit(in $) | |||
| Service revenue | 610,000 | 240,000 | 850,000 | ||
| Less: | |||||
| Cost of services | (470,000) | (130,000) | (600,000) | ||
| (35,000) | (18,000) | 4,000 | (57,000) | ||
| Other expenses | (57,000) | (60,000) | (117,000) | ||
| Income from S | 28,000 | 28,000 | 0 | ||
| Net income | $76,000 | $32,000 | $32,000 | $76,000 | |
| Statement of Retained Earnings | |||||
| Retained earnings Jan 1 | 292,000 | 120,000 | 120,000 | 292,000 | |
| Income, from above | 76,000 | 32,000 | 32,000 | 76,000 | |
| Dividends declared | (30,000) | (12,000) | 12,000 | (30,000) | |
| Retained earnings as on Dec 1 carried forward | $338,000 | $140,000 | $152,000 | $12,000 | $338,000 |
| Balance Sheet | |||||
| Cash | 74,000 | 42,000 | 116,000 | ||
| Accounts receivable | 130,000 | 53,000 | 2,500 | 180,500 | |
| Investment in S | 268,000 | 268,000 | |||
| Land | 60,000 | 50,000 | 110,000 | ||
| Buildings and equipment | 500,000 | 350,000 | 40,000 | 890,000 | |
| Less: accumulated depreciation | (265,000) | (93,000) | 12,000 | (370,000) | |
| Income from S | 32,000 | 32,000 | 0 | ||
| Total assets | $767,000 | $402,000 | $926,500 | ||
| Liabilities | |||||
| Accounts payable | 71,000 | 17,000 | 2,500 | 85,500 | |
| Taxes payable | 58,000 | 60,000 | 118,000 | ||
| Notes payable | 100,000 | 85,000 | 185,000 | ||
| Common stock: | 200,000 | 100,000 | 100,000 | 200,000 | |
| Retained earnings from above | 338,000 | 140,000 | 152,000 | 12,000 | 338,000 |
| Total liabilities and equities | $767,000 | $402,000 | $926,500 | ||
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