James Craft Company Company Inventory, December 31 Other Current Assets 50,000 180,000 100,000 .... 126,000 Investment in Craft Company Land..... 50,000 350,000 (100,000) 20,000 (120,000) 50,000 Buildings and Equipment.. Accumulated Depreciation Other Intangibles... 320,000 (60,000) (40,000) (100,000) Current Liabilities. Bonds Payable..... Other Long-Term Liabilities Common StockJames.. (200,000) (200,000) (100,000) (214,000) .. .. Other Paid-In Capital in Excess of ParJames Retained Earnings-James Common Stock–Craft. . Other Paid-In Capital in Excess of Par-Craft Retained Earnings-Craft Net Sales .... Cost of Goods Sold . (50,000) (100,000) (190,000) (450,000) .. ... Operating Expenses Subsidiary Income... (520,000) 300,000 121,000 260,000 100,000 .... Dividends Declared. 50,000 30,000 Totals ... * To be calculated and inserted.
On January 1, 2015, James Company purchases 70% of the common stock of Craft Company for $245,000. On this date, Craft has common stock, other paid-in capital in excess of par, and
Net income and dividends for two years for Craft Company are as follows:
2015 2016
Net income for year. . . . . . . . . . . . . . . . . . . . $60,000 $90,000
Dividends, declared in December . . . . . . . . 20,000 30,000
In 2016, the net income of Craft from January 1 through April 30 is $30,000.
On January 1, 2015, the only tangible asset of Craft that is undervalued is equipment, which is worth $20,000 more than book value. The equipment has a remaining life of four years, and straight-line
The trial balances for the companies on December 31, 2016, are as follows:(attached)
1. Using this information, prepare a determination and distribution of excess schedule. Prepare an analysis of the later purchase of a 20% interest.
2. James Company carries the investment in Craft Company under the simple equity method. In general journal form, record the entries that would be made to apply the equity method in 2015 and 2016.
3. Compute the balance that should appear in Investment in Craft Company and in Subsidiary Income on December 31, 2016 (the second year). Fill in these amounts on James Company’s
4. Complete the worksheet for consolidated financial statements for 2016.
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