On January 1, 2019, Platini Company acquired 80% of the common stock of Squillaci Company for $560,000. On this date, Squillaci had total owners' equity of $540,000, including retained earnings of $240,000. During 2019, Squillaci had a net income of $60,000 and paid no dividends. Any excess of cost over book value is attributable to land, undervalued $10,000, and to goodwill. On January 1, 2020, Platini held merchandise acquired from Squillaci for $10,000. During 2020, Squillaci sold merchandise to Platini for $100,000, of which $20,000 is held by Platini on December 31, 2020. Squillaci’s usual gross profit on affiliated sales is 40%. On December 31, 2020, Platini still owes Squillaci $20,000 for merchandise acquired in December. On January 1, 2020, Platini sold to Squillaci some equipment with a cost of $50,000 and a book value of $20,000. The sales price was $40,000. Squillaci is depreciating the equipment over a five-year life, assuming no salvage value and using the straight-line method. As at December 31, 2020, the trial balances of Platini and Squillaci are provided on the next page Required: i) Which method is being used by Platini to account for its investment in Squillaci? Provide 2 reasons to justify your selection. ii) Prepare and complete the worksheet for consolidated financial statements for the year ended December 31, 2020. Prepare all supporting schedules. Round all computations to the nearest dollar. Trial Balance as at December 31, 2020 Account Titles Platini Squillaci Inventory, December 31 $100,000 $80,000 Other Current Assets 253,000 450,000 Investment in Subsidiary 560,000 Other Long-Term Investments 50,000 30,000 Land 140,000 70,000 Buildings and Equipment 315,000 400,000 Accumulated Depreciation (208,000) (110,000) Other Intangibles 60,000 Current Liabilities (150,000) (100,000) Bonds Payable (100,000) Premium on Bonds Payable (5,000) Other Long-Term Liabilities (200,000) (150,000) Common Stock (200,000) (100,000) Other Paid-in Capital (100,000) (200,000) Retained Earnings (421,000) (300,000) Net Sales (600,000) (380,000) Cost of Goods Sold 350,000 180,000 Operating Expenses 140,000 100,000 Dividend Income (24,000) Gain on Sale of Equipment (20,000) Dividends Declared 60,000 30,000 TOTALS 0 0

On January 1, 2019, Platini Company acquired 80% of the common stock of Squillaci Company for $560,000. On this date, Squillaci had total owners' equity of $540,000, including retained earnings of $240,000. During 2019, Squillaci had a net income of $60,000 and paid no dividends. Any excess of cost over book value is attributable to land, undervalued $10,000, and to goodwill. On January 1, 2020, Platini held merchandise acquired from Squillaci for $10,000. During 2020, Squillaci sold merchandise to Platini for $100,000, of which $20,000 is held by Platini on December 31, 2020. Squillaci’s usual gross profit on affiliated sales is 40%. On December 31, 2020, Platini still owes Squillaci $20,000 for merchandise acquired in December. On January 1, 2020, Platini sold to Squillaci some equipment with a cost of $50,000 and a book value of $20,000. The sales price was $40,000. Squillaci is depreciating the equipment over a five-year life, assuming no salvage value and using the straight-line method. As at December 31, 2020, the trial balances of Platini and Squillaci are provided on the next page Required: i) Which method is being used by Platini to account for its investment in Squillaci? Provide 2 reasons to justify your selection. ii) Prepare and complete the worksheet for consolidated financial statements for the year ended December 31, 2020. Prepare all supporting schedules. Round all computations to the nearest dollar. Trial Balance as at December 31, 2020 Account Titles Platini Squillaci Inventory, December 31 $100,000 $80,000 Other Current Assets 253,000 450,000 Investment in Subsidiary 560,000 Other Long-Term Investments 50,000 30,000 Land 140,000 70,000 Buildings and Equipment 315,000 400,000 Accumulated Depreciation (208,000) (110,000) Other Intangibles 60,000 Current Liabilities (150,000) (100,000) Bonds Payable (100,000) Premium on Bonds Payable (5,000) Other Long-Term Liabilities (200,000) (150,000) Common Stock (200,000) (100,000) Other Paid-in Capital (100,000) (200,000) Retained Earnings (421,000) (300,000) Net Sales (600,000) (380,000) Cost of Goods Sold 350,000 180,000 Operating Expenses 140,000 100,000 Dividend Income (24,000) Gain on Sale of Equipment (20,000) Dividends Declared 60,000 30,000 TOTALS 0 0

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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Question

Any excess of cost over book value is attributable to land, undervalued $10,000, and to goodwill.

On January 1, 2020, Platini held merchandise acquired from Squillaci for $10,000. During 2020, Squillaci sold merchandise to Platini for $100,000, of which $20,000 is held by Platini on December 31, 2020. Squillaci’s usual gross profit on affiliated sales is 40%. On December 31, 2020, Platini still owes Squillaci $20,000 for merchandise acquired in December.

On January 1, 2020, Platini sold to Squillaci some equipment with a cost of $50,000 and a book value of $20,000. The sales price was $40,000. Squillaci is depreciating the equipment over a five-year life, assuming no salvage value and using the straight-line method.

As at December 31, 2020, the trial balances of Platini and Squillaci are provided on the next page

Required:
i) Which method is being used by Platini to account for its investment in Squillaci? Provide 2 reasons to justify your selection.
ii) Prepare and complete the worksheet for consolidated financial statements for the year ended December 31, 2020. Prepare all supporting schedules. Round all computations to the nearest dollar.

Trial Balance as at
December 31, 2020

Account Titles	Platini	Squillaci
Inventory, December 31	$100,000	$80,000
Other Current Assets	253,000	450,000
Investment in Subsidiary	560,000
Other Long-Term Investments	50,000	30,000
Land	140,000	70,000
Buildings and Equipment	315,000	400,000
Accumulated Depreciation	(208,000)	(110,000)
Other Intangibles	60,000
Current Liabilities	(150,000)	(100,000)

Bonds Payable	(100,000)
Premium on Bonds Payable	(5,000)
Other Long-Term Liabilities	(200,000)	(150,000)
Common Stock	(200,000)	(100,000)
Other Paid-in Capital	(100,000)	(200,000)
Retained Earnings	(421,000)	(300,000)
Net Sales	(600,000)	(380,000)
Cost of Goods Sold	350,000	180,000
Operating Expenses	140,000	100,000
Dividend Income	(24,000)

Gain on Sale of Equipment	(20,000)
Dividends Declared	60,000	30,000
TOTALS	0	0

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