Eliminating Entries After First and Second Years During 2023, Peerless Company's wholly-owned subsidiary, Safeco Inc. reported net income of $2.100,000 and declared and paid dividends of $800.000. Peerless acquired Safeco on January 2, 202 a cash cost of $10,000,000, which was $6,000,000 in excess of the book value of net assets acquired. Safeco's equipment (5-year life) was overvalued by $500,000. Its inventory, reported using FIFO, overvalued by $200,000. The remaining excess of acquisition cost over book value was attributed to goodwill. Impairment testing indicates that goodwill was impaired by $100,000 during 2023. Saf date of acquisition inventory was sold during 2023. Required Prepare the necessary eliminating entries to consolidate the financial statements of Peerless and Safeco at December 31, 2023, Enter numerical answers using all zeros (do not abbreviate in thousands or in millions).

Eliminating Entries After First and Second Years During 2023, Peerless Company's wholly-owned subsidiary, Safeco Inc. reported net income of $2.100,000 and declared and paid dividends of $800.000. Peerless acquired Safeco on January 2, 202 a cash cost of $10,000,000, which was $6,000,000 in excess of the book value of net assets acquired. Safeco's equipment (5-year life) was overvalued by $500,000. Its inventory, reported using FIFO, overvalued by $200,000. The remaining excess of acquisition cost over book value was attributed to goodwill. Impairment testing indicates that goodwill was impaired by $100,000 during 2023. Saf date of acquisition inventory was sold during 2023. Required Prepare the necessary eliminating entries to consolidate the financial statements of Peerless and Safeco at December 31, 2023, Enter numerical answers using all zeros (do not abbreviate in thousands or in millions).

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter16: Advanced Topics Concerning Complex Auditing Judgments

Section: Chapter Questions

Problem 55RSCQ

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On January 1, 2020, AMI Corporation purchased the non-cash net assets of Sheffield Ltd. for $8,087,900. Following is the statement of financial position of Sheffield Ltd. from the company's year-end the previous day: Sheffield Ltd.Statement of Financial PositionAs at December 31, 2019 Cash $630,000 Accounts receivable 554,000 Inventory 2,510,000 Property, plant, and equipment (net) 2,070,000 Land 2,570,000 $8,334,000 Accounts payable $324,000 Common shares 2,520,000 Retained earnings 5,490,000 $8,334,000 As part of the negotiations, AMI and Sheffield agreed on the following fair values for the items on Sheffield's statement of financial position: Accounts receivable $552,400 Inventory 2,265,000 Property, plant, and equipment 1,870,000 Land 3,620,000 Accounts payable 313,500 Prepare the journal entry on the books of AMI Corporation to record the purchase, assuming that instead of buying the net assets of…
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During 2020, Peerless Company’s wholly-owned subsidiary, Safeco Inc. reported net income of $1,600,000 and declared and paid dividends of $600,000. Peerless acquired Safeco on January 2, 2020, at a cash cost of $8,000,000, which was $1,000,000 in excess of the book value of net assets acquired. Safeco’s equipment (five-year life) was undervalued by $500,000. Its inventory, reported using FIFO, was undervalued by $200,000. The remaining $300,000 could not be allocated to identifiable assets and liabilities. Impairment testing indicates that goodwill was impaired by $50,000 during 2020. Safeco’s beginning inventory was sold during 2020. Required: Prepare the journal entries recorded by Peerless in 2020 to record the acquisition and apply the complete equity method. Prepare the necessary eliminating entries to consolidate the financial statements of Peerless and Safeco at December 31, 2020.
Matthews Co. acquired all of the common stock of Jackson Co. on January 1, 2020. As of that date, Jackson had the following trial balance: Debit Credit Accounts payable $ 60,000 Accounts receivable $ 50,000 Additional paid-in capital 60,000 Buildings (net) (20-year life) 140,000 Cash and short-term investments 70,000 Common stock 300,000 Equipment (net) (8-year life) Intangible assets (indefinite life) 240,000 110,000 Land 90,000 Long-term liabilities (mature 12/31/22) Retained earnings, 1/1/20 Supplies 180,000 120,000 20,000 Totals $ 720,000 $ 720,000 During 2020, Jackson reported net income of $96,000 while paying dividends of $12,000. During 2021, Jackson reported net income of $132,000 while paying dividends of $36,000. Assume that Matthews Co. acquired the common stock of Jackson Co. for $588,000 in cash. As of January 1, 2020, Jackson's land had a fair value of $102,000, its buildings were valued at $188,000, and its equipment was appraised at $216,000. Any excess of…
On January 1, 2024, Windsor Company purchased 8,896 shares of Sheridan Company's common stock for $131,000. Immediately after the stock acquisition, the statements of financial position of Windsor and Sheridan appeared as follows: Assets Windsor Sheridan Cash $40,850 $20,370 Accounts receivable 50,180 32,780 Inventory 44,020 26,230 Investment in Sheridan Company 131,000 Plant assets 160,360 101,030 Accumulated depreciation-plant assets (55,790) (18,940) Total $370,620 $161,470 Liabilities and Owners' Equity Current liabilities $16,910 $23,570 Mortgage notes payable 40,080 Common stock, $10 par value 112,700 111,200 Other contributed capital 125,210 15,650 Retained earnings 75,720 11,050 Total $370,620 $161,470 (a1) (a2) Prepare a schedule to compute the difference between book value of equity and the value implied by the purchase price. Any difference between the book value of equity and the value implied by the purchase price relates to subsidiary plant assets. $ Parent Share $ Non-…
On January 1, 2024, Windsor Company purchased 8,896 shares of Sheridan Company's common stock for $131,000. Immediately after the stock acquisition, the statements of financial position of Windsor and Sheridan appeared as follows: Assets Windsor Sheridan Cash $40,850 $20,370 Accounts receivable 50,180 32,780 Inventory 44,020 26,230 Investment in Sheridan Company 131,000 Plant assets 160,360 101,030 Accumulated depreciation-plant assets (55,790) (18,940) Total $370,620 $161,470 Liabilities and Owners' Equity Current liabilities $16,910 $23,570 Mortgage notes payable 40,080 Common stock, $10 par value 112,700 111,200 Other contributed capital 125,210 15,650 Retained earnings 75,720 11,050 Total $370,620 $161,470 Prepare a consolidated balance sheet workpaper as of January 1, 2024. Cash WINDSOR COMPANY AND SUBSIDIARY SHERIDAN Consolidated Balance Sheet Workpaper January 1, 2024 Windsor Sheridan Eliminations Noncontrolling Consolidated Company Company Debit Credit Interest Balance 40.850…
On January 1, 2020, Subsidiary Company purchased a delivery truck with an expected useful life of 5 years. On January 1, 2022, Subsidiary Company sold the truck to Parent Company and recorded the following entry: Cash 43,800 21,200 Accumulated depreciation Truck 53,000 12,000 Gain on sale of truck Parent holds 60% of Subsidiary's voting shares. Subsidiary reported net income of P55,000 and Parent reported separate net income of P98,000 for 2022. Parent Company continued the method used by Subsidiary Co. in recording the depreciation expense and the same remaining life. 1. The consolidated net income for 2022 a. P 153,000 b. P 141,000 c. P 145,000 d. P 144,000 2. Non-controlling interest in the consolidated net income a. P 18,800 b. P 17, 200 c. P 22,000 d. P 19, 200 3. Depreciation expense recorded by the parent company a. P4,000 b. P 10, 600 c. P 14,600 d. P 10, 950 4. Depreciation expense reported in the Consolidated Income Statement c. P 14,600 d. P 10, 950 a. P 4,000 b. P 10, 600…
Require A. B. & C.
On January 1, 2019, Triple A Company acquired Bodyguard Company’s outstanding common stock for $842,000 in cash. As of that date the following information was acquired from Bodyguard, the subsidiary of Triple A: Building (12-year life) was undervalued on its balance sheet by $72,000 Equipment (10-year life) was undervalued by $10,000 Licensing agreement (20-year life) unrecorded, assessed at $40,000 Book value as at January 1, 2019 was $720,000 Net income reported during 2019 was $100,000 Dividends paid in 2019 $30,000 Earnings by Bodyguard (subsidiary) in 2020 $120,000 Dividends distributed by Bodyguard in 2020 $20,000 As of December 31, 2021Triple A and Bodyguard reported the following for the year: Triple A December 31, 2021 Bodyguard December 31, 2021 Debit Credit Debit Credit Buildings $1,540,000 $460,000 Cash and receivables 50,000 90,000 Common stock $900,000 $400,000 Dividends paid 70,000 10,000 Equipment…
On January 1, 2021, PCO purchased 70% ownership of SCO which resulted to a gain on acquisition of P100,000. Net assets of SCO were fairly valued except for inventory which was understated by P1,500,000. A third of these inventories remained unsold as of the end of the calendar year. The operations of the two companies for 2021 are as follows: PCO SCO Sales P3,100,000 P2,600,000 (COGS) (1,300,000) (1,250,000) Gross profit 1,800,000 1,350,000 (OPEX) (200,000) (150,000) Other income 0 200,000 (Other expenses) (120,000) 0 Net income P1,480,000 P 400,000 In the consolidated statement of comprehensive income for the year ended December 31, 2021, how much is the cost of goods sold? Group of answer choices a.1,850,000 b.3,550,000 c.1,550,000 d.3,250,000