Peak Corporation owns 75 percent of Summit Company's voting shares, acquired on March 21, 20X5, at book value. At that date, the fair value of the noncontrolling interest was equal to 25 percent of the book value of Summit Company. Peak Corporation Summit Company Cash and Receivables $ 70,000 $ 10,000 Inventory 46,250 20,000 Land 140,000 45,000 Buildings and Equipment 250,000 150,000 Investment in Summit Company Stock 93,750 Debits $ 600,000 $ 225,000 Accumulated Depreciation $ 100,000 $ 42,500 Accounts Payable 30,000 12,500 Notes Payable 70,000 45,000 Common Stock 100,000 100,000 Retained Earnings 300,000 25,000 Credits $ 600,000 $ 225,000 On January 1, 20X4, Peak paid $150,000 for equipment with a 10-year expected total economic life. The equipment was depreciated on a straight-line basis with no residual value. Summit purchased the equipment from Peak on December 31, 20X6, for $140,000. Summit sold land it had purchased for $75,000 on February 18, 20X4, to Peak for $60,000 on October 10, 20X7. Required: Prepare the consolidation entries for 20X8 related to the sale of depreciable assets and land if Peak uses the fully adjusted equity method to account for its investment in Summit.
Peak Corporation owns 75 percent of Summit Company's voting shares, acquired on March 21, 20X5, at book value. At that date, the fair value of the noncontrolling interest was equal to 25 percent of the book value of Summit Company. Peak Corporation Summit Company Cash and Receivables $ 70,000 $ 10,000 Inventory 46,250 20,000 Land 140,000 45,000 Buildings and Equipment 250,000 150,000 Investment in Summit Company Stock 93,750 Debits $ 600,000 $ 225,000 Accumulated Depreciation $ 100,000 $ 42,500 Accounts Payable 30,000 12,500 Notes Payable 70,000 45,000 Common Stock 100,000 100,000 Retained Earnings 300,000 25,000 Credits $ 600,000 $ 225,000 On January 1, 20X4, Peak paid $150,000 for equipment with a 10-year expected total economic life. The equipment was depreciated on a straight-line basis with no residual value. Summit purchased the equipment from Peak on December 31, 20X6, for $140,000. Summit sold land it had purchased for $75,000 on February 18, 20X4, to Peak for $60,000 on October 10, 20X7. Required: Prepare the consolidation entries for 20X8 related to the sale of depreciable assets and land if Peak uses the fully adjusted equity method to account for its investment in Summit.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Peak Corporation owns 75 percent of Summit Company's voting shares, acquired on March 21, 20X5, at book value. At that date, the fair value of the noncontrolling interest was equal to 25 percent of the book value of Summit Company.
| Peak Corporation | Summit Company | |
|---|---|---|
| Cash and Receivables | $ 70,000 | $ 10,000 |
| Inventory | 46,250 | 20,000 |
| Land | 140,000 | 45,000 |
| Buildings and Equipment | 250,000 | 150,000 |
| Investment in Summit Company Stock | 93,750 | |
| Debits | $ 600,000 | $ 225,000 |
| $ 100,000 | $ 42,500 | |
| Accounts Payable | 30,000 | 12,500 |
| Notes Payable | 70,000 | 45,000 |
| Common Stock | 100,000 | 100,000 |
| 300,000 | 25,000 | |
| Credits | $ 600,000 | $ 225,000 |
On January 1, 20X4, Peak paid $150,000 for equipment with a 10-year expected total economic life. The equipment was
Required:
Prepare the consolidation entries for 20X8 related to the sale of depreciable assets and land if Peak uses the fully adjusted equity method to account for its investment in Summit.
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