On January 1, 2019, Monica Company acquired 70 percent of Young Company’s outstanding common stock for $798,000. The fair value of the noncontrolling interest at the acquisition date was $342,000. Young reported stockholders’ equity accounts on that date as follows:           Common stock—$10 par value $ 200,000   Additional paid-in capital   100,000   Retained earnings   660,000       In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building (with a five-year remaining life) by $60,000. Any remaining excess acquisition-date fair value was allocated to a franchise agreement to be amortized over 10 years.   During the subsequent years, Young sold Monica inventory at a 20 percent gross profit rate. Monica consistently resold this merchandise in the year of acquisition or in the period immediately following. Transfers for the three years after this business combination was created amounted to the following:   Year Transfer Price   Inventory Remaining at Year-End (at transfer price) 2019 $ 60,000     $ 35,000   2020   80,000       37,000   2021   90,000       43,000       In addition, Monica sold Young several pieces of fully depreciated equipment on January 1, 2020, for $61,000. The equipment had originally cost Monica $100,000. Young plans to depreciate these assets over a 5-year period.   In 2021, Young earns a net income of $230,000 and declares and pays $80,000 in cash dividends. These figures increase the subsidiary's Retained Earnings to a $990,000 balance at the end of 2021.   Monica employs the equity method of accounting. Hence, it reports $155,560 investment income for 2021 with an Investment account balance of $935,980. 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.)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

On January 1, 2019, Monica Company acquired 70 percent of Young Company’s outstanding common stock for $798,000. The fair value of the noncontrolling interest at the acquisition date was $342,000. Young reported stockholders’ equity accounts on that date as follows:

 

       
Common stock—$10 par value $ 200,000  
Additional paid-in capital   100,000  
Retained earnings   660,000  
 

 

In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building (with a five-year remaining life) by $60,000. Any remaining excess acquisition-date fair value was allocated to a franchise agreement to be amortized over 10 years.

 

During the subsequent years, Young sold Monica inventory at a 20 percent gross profit rate. Monica consistently resold this merchandise in the year of acquisition or in the period immediately following. Transfers for the three years after this business combination was created amounted to the following:

 

Year Transfer Price   Inventory Remaining
at Year-End
(at transfer price)
2019 $ 60,000     $ 35,000  
2020   80,000       37,000  
2021   90,000       43,000  
 

 

In addition, Monica sold Young several pieces of fully depreciated equipment on January 1, 2020, for $61,000. The equipment had originally cost Monica $100,000. Young plans to depreciate these assets over a 5-year period.

 

In 2021, Young earns a net income of $230,000 and declares and pays $80,000 in cash dividends. These figures increase the subsidiary's Retained Earnings to a $990,000 balance at the end of 2021.

 

Monica employs the equity method of accounting. Hence, it reports $155,560 investment income for 2021 with an Investment account balance of $935,980. 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.)

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 2 images

Blurred answer
Knowledge Booster
Consolidations
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education