H1. Monica employs the equity method of accounting. Hence, it reports $154,640 investment income for 2021 with an Investment accountbalance of $1,062,800. Prepare the worksheet entries required for the consolidation of Monica Company and Young Company. (If noentry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)No123456789Transaction11023Show Transcribed Text45678910Retained earnings, 1/1/21 (Young)Cost of goods soldRetained earnings, 1/1/21 (Monica)EquipmentAccumulated depreciation-EquipmentInvestment in YoungRetained earnings, 1/1/21 (Monica)Common stock - YoungAdditional paid-in capital - YoungRetained earnings, 1/1/21 (Young)Investment in YoungNoncontrolling interest in YoungBuildingsFranchise agreementInvestment in YoungNoncontrolling interest in YoungDividend incomeAnswer is not complete.AccountsDividends declaredDepreciation expenseAmortization expenseFranchise agreementBuildingsSalesCost of goods soldCost of goods soldInventoryAccumulated depreciation EquipmentDepreciation expenseĴ>>✓✓*** ››000x✓✓Debit6,800✔46,400✔36,000✔118,560 x300,00070,000✔818,200✔3333XxxXxxxxxXxCredit6,800✔82,400✔118,560 x950,560237,64054,00016,000✔52,000 X60,00018,000 XXX2,000 X8,000 X11,600 X56,000✔14,00052,0002,00018,00060,000XX8,000 x11,600x On January 1, 2019, Monica Company acquired 80 percent of Young Company's outstanding common stock for $888,000. The fairvalue of the noncontrolling interest at the acquisition date was $222,000. Young reported stockholders' equity accounts on that dateas follows:Common stock-$10 par valueAdditional paid-in capitalRetained earningsIn establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued abuilding (with a five-year remaining life) by $90,000. Any remaining excess acquisition-date fair value was allocated to a franchiseagreement to be amortized over 10 years.$ 300,00070,000630,000During the subsequent years, Young sold Monica inventory at a 20 percent gross profit rate. Monica consistently resold thismerchandise in the year of acquisition or in the period immediately following. Transfers for the three years after this businesscombination was created amounted to the following:Year201920202021TransferPrice$ 30,00050,00060,000Inventory Remainingat Year-End(at transfer price)$ 32,00034,00040,000In addition, Monica sold Young several pieces of fully depreciated equipment on January 1, 2020, for $58,000. The equipment hadoriginally cost Monica $94,000. Young plans to depreciate these assets over a 5-year period.In 2021, Young earns a net income of $200,000 and declares and pays $65,000 in cash dividends. These figures increase thesubsidiary's Retained Earnings to a $960,000 balance at the end of 2021.

Depreciation is the process through which the expense of utilizing a tangible item is linked to the…

Monica employs the equity method of accounting. Hence, it reports $154,640 investment income for 2021 with an Investment account balance of $1,062,800. Prepare the worksheet entries required for the consolidation of Monica Company and Young Company. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) No 1 2 3 4 5 6 7 8 9 Transaction 1 10 2 3 Show Transcribed Text 4 5 6 7 8 9 10 Retained earnings, 1/1/21 (Young) Cost of goods sold Retained earnings, 1/1/21 (Monica) Equipment Accumulated depreciation-Equipment Investment in Young Retained earnings, 1/1/21 (Monica) Common stock - Young Additional paid-in capital - Young Retained earnings, 1/1/21 (Young) Investment in Young Noncontrolling interest in Young Buildings Franchise agreement Investment in Young Dividend income Answer is not complete. Noncontrolling interest in Young Dividends declared Accounts Depreciation expense Amortization expense Franchise agreement Buildings Sales Cost of goods sold Cost of goods sold Inventory Accumulated depreciation-Equipment Depreciation expense 3 20 ✓ *** ✓ XX 00000 C Debit 6,800 46,400 36,000 118,560 X 300,000 70,000✔ 818,200✔✔ 0000 * * * * * * * * * * * * x Credit 6,800 118,560 54,000 82,400 950,560 237,640 16,000 52,000x ** 18,000x 2,000x 60,000 X 8,000 x 11,600 x 56,000 14,000✔ 52,000 x 2,000 x 18,000 60,000 8,000 X 11,600

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q