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e Corporation acquired 80 percent of Steak Company's voting shares on January 1, 20X4, for $280,000 in ritles. At that date, the noncontrolling Interest had a fair value of $70,000 and Steak reported net assets of e uses the fully adjusted equity method. Trial balances for the two companies on December 31, 20X7, are a en sh counts Receivable ventory ildings and Equipment vestment in Steak Company st of Goods Sold preciation Expense her Expenses vidends Declared cumulated Depreciation Prime Corporation Debit $ 130,300 80,000 170,000 600,000 293,000 416,000 30,000 24,000 50,000 Credit $ 310,000 Steak Company Debit $ 10,000 70,000 110,000 400,000 282,000 20,000 18,000 25,000 Credit $ 120,000

e Corporation acquired 80 percent of Steak Company's voting shares on January 1, 20X4, for $280,000 in ritles. At that date, the noncontrolling Interest had a fair value of $70,000 and Steak reported net assets of e uses the fully adjusted equity method. Trial balances for the two companies on December 31, 20X7, are a en sh counts Receivable ventory ildings and Equipment vestment in Steak Company st of Goods Sold preciation Expense her Expenses vidends Declared cumulated Depreciation Prime Corporation Debit $ 130,300 80,000 170,000 600,000 293,000 416,000 30,000 24,000 50,000 Credit $ 310,000 Steak Company Debit $ 10,000 70,000 110,000 400,000 282,000 20,000 18,000 25,000 Credit $ 120,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Prime Corporation acquired 80 percent of Steak Company's voting shares on January 1, 20X4, for $280,000 in cash and marketable securities. At that date, the noncontrolling interest had a fair value of $70,000 and Steak reported net assets of $300,000. Assume Prime uses the fully adjusted equity method. Trial balances for the two companies on December 31, 20X7, are as follows: Steak Company Iten Cash Accounts Receivable. Inventory Buildings and Equipment Investment in Steak Company Cost of Goods Sold Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Bond Premium Connon Stock Additional Paid-in Capital Retained Earnings Sales Other Income Income from Steak Company Total No A B C D E TI G Event 1 2 3 4 Additional Information 1. The full amount of the differential at acquisition was assigned to buildings and equipment with a remaining 10-year economic life. 2. Prime and Steak regularly purchase Inventory from each other. During 20X6, Steak Company sold Inventory costing $40,000 to Prime Corporation for $60,000, and Prime resold 60 percent of the Inventory In 20X6 and 40 percent In 20X7. Also in 20X6, Prime sold Inventory costing $20,000 to Steak for $26,000. Steak resold two-thirds of the Inventory in 20X6 and one-third in 20x7. 3. During 20X7, Steak sold Inventory costing $30,000 to Prime for $45,000, and Prime sold Items purchased for $9,000 to Steak for $12,000. Before the end of the year. Prime resold one-third of the Inventory it purchased from Steak In 20x7. Steak continues to hold all the units purchased from Prime during 20X7. 4. Steak owes Prime $10,000 on account on December 31, 20X7. 5 Prime Corporation 5. Assume that both companies use straight-line depreciation and that no property, plant, and equipment has been purchased since the acquisition. Required: 6 Debit $ 130,300 80,000 170,000 600,000 293,000 a. Prepare the 20X7 journal entries recorded on Prime's books related to its Investment in Steak if Prime uses the equity method. Note: If no entry is required for a transaction/event, select "No Journal entry required" in the first account field. 7 416,000 30,000 24,000 50,000 Cash $ 1,793,300 Investment in Steak Company Income from Steak Company Depreciation expense Accumulated depreciation Answer is not complete. General Journal Investment in Steak Company Credit $ 310,000 100,000 300,000 200,000 337,500 500,000 20,400 25,400 $ 1,793,300 Investment in Steak Company Investment in Steak Company Investment in Steak Company Income from Steak Company Debit $ 10,000 70,000 Depreciation expense Investment in Steak Company 110,000 400,000 202,000 20,000 18,000 25,000 $ 855,000 ›› 33 ** 3 X ›› $ 120,000 15,200 100,000 3* Credit X 215,000 250,000 30,000 $ 855,000 4,888 100,000 20,000 Debit 32,000✔ 20,000 → Credit 32,000✔ 20,000 b. Prepare all consolidation entries needed to complete a consolidation worksheet as of December 31, 20X7. Note: If no entry is required for a transaction/event, select "No Journal entry required" in the first account field.
Transcribed Image Text:Prime Corporation acquired 80 percent of Steak Company's voting shares on January 1, 20X4, for $280,000 in cash and marketable securities. At that date, the noncontrolling interest had a fair value of $70,000 and Steak reported net assets of $300,000. Assume Prime uses the fully adjusted equity method. Trial balances for the two companies on December 31, 20X7, are as follows: Steak Company Iten Cash Accounts Receivable. Inventory Buildings and Equipment Investment in Steak Company Cost of Goods Sold Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Bond Premium Connon Stock Additional Paid-in Capital Retained Earnings Sales Other Income Income from Steak Company Total No A B C D E TI G Event 1 2 3 4 Additional Information 1. The full amount of the differential at acquisition was assigned to buildings and equipment with a remaining 10-year economic life. 2. Prime and Steak regularly purchase Inventory from each other. During 20X6, Steak Company sold Inventory costing $40,000 to Prime Corporation for $60,000, and Prime resold 60 percent of the Inventory In 20X6 and 40 percent In 20X7. Also in 20X6, Prime sold Inventory costing $20,000 to Steak for $26,000. Steak resold two-thirds of the Inventory in 20X6 and one-third in 20x7. 3. During 20X7, Steak sold Inventory costing $30,000 to Prime for $45,000, and Prime sold Items purchased for $9,000 to Steak for $12,000. Before the end of the year. Prime resold one-third of the Inventory it purchased from Steak In 20x7. Steak continues to hold all the units purchased from Prime during 20X7. 4. Steak owes Prime $10,000 on account on December 31, 20X7. 5 Prime Corporation 5. Assume that both companies use straight-line depreciation and that no property, plant, and equipment has been purchased since the acquisition. Required: 6 Debit $ 130,300 80,000 170,000 600,000 293,000 a. Prepare the 20X7 journal entries recorded on Prime's books related to its Investment in Steak if Prime uses the equity method. Note: If no entry is required for a transaction/event, select "No Journal entry required" in the first account field. 7 416,000 30,000 24,000 50,000 Cash $ 1,793,300 Investment in Steak Company Income from Steak Company Depreciation expense Accumulated depreciation Answer is not complete. General Journal Investment in Steak Company Credit $ 310,000 100,000 300,000 200,000 337,500 500,000 20,400 25,400 $ 1,793,300 Investment in Steak Company Investment in Steak Company Investment in Steak Company Income from Steak Company Debit $ 10,000 70,000 Depreciation expense Investment in Steak Company 110,000 400,000 202,000 20,000 18,000 25,000 $ 855,000 ›› 33 ** 3 X ›› $ 120,000 15,200 100,000 3* Credit X 215,000 250,000 30,000 $ 855,000 4,888 100,000 20,000 Debit 32,000✔ 20,000 → Credit 32,000✔ 20,000 b. Prepare all consolidation entries needed to complete a consolidation worksheet as of December 31, 20X7. Note: If no entry is required for a transaction/event, select "No Journal entry required" in the first account field.
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