Peanut Company acquired 100 percent of Snoopy Company’s outstanding common stock for $300,000 on January 1, 20X8, when the book value of Snoopy’s net assets was equal to $300,000. Peanut uses the equity method to account for investments. Trial balance data for Peanut and Snoopy as of December 31, 20X8, are as follows: Peanut Company Snoopy Company Debit Credit Debit Credit Cash $ 130,000 $ 80,000 Accounts Receivable 165,000 65,000 Inventory 200,000 75,000 Investment in Snoopy Company 355,000 0 Land 200,000 100,000 Buildings and Equipment 700,000 200,000 Cost of Goods Sold 200,000 125,000 Depreciation Expense 50,000 10,000 Selling and Administrative Expense 225,000 40,000 Dividends Declared 100,000 20,000 Accumulated Depreciation $ 450,000 $ 20,000 Accounts Payable 75,000 60,000 Bonds Payable 200,000 85,000 Common Stock 500,000 200,000 Retained Earnings 225,000 100,000 Sales 800,000 250,000 Income from Snoopy Company 75,000 0 Total $ 2,325,000 $ 2,325,000 $ 715,000 $ 715,000 (Assume the company prepares the optional Accumulated Depreciation Elimination Entry) Required: Prepare the journal entries on Peanut’s books for the acquisition of Snoopy on January 1, 20X8, as well as any normal equity method entry(ies) related to the investment in Snoopy Company during 20X8. Prepare a consolidation worksheet for 20X8.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Concept explainers

Question

Peanut Company acquired 100 percent of Snoopy Company’s outstanding common stock for $300,000 on January 1, 20X8, when the book value of Snoopy’s net assets was equal to $300,000. Peanut uses the equity method to account for investments. Trial balance data for Peanut and Snoopy as of December 31, 20X8, are as follows:

	Peanut Company	Snoopy Company
Debit	Credit	Debit	Credit
Cash	$ 130,000		$ 80,000
Accounts Receivable	165,000		65,000
Inventory	200,000		75,000
Investment in Snoopy Company	355,000		0
Land	200,000		100,000
Buildings and Equipment	700,000		200,000
Cost of Goods Sold	200,000		125,000
Depreciation Expense	50,000		10,000
Selling and Administrative Expense	225,000		40,000
Dividends Declared	100,000		20,000
Accumulated Depreciation		$ 450,000		$ 20,000
Accounts Payable		75,000		60,000
Bonds Payable		200,000		85,000
Common Stock		500,000		200,000
Retained Earnings		225,000		100,000
Sales		800,000		250,000
Income from Snoopy Company		75,000		0
Total	$ 2,325,000	$ 2,325,000	$ 715,000	$ 715,000

(Assume the company prepares the optional Accumulated Depreciation Elimination Entry)

Required:

Prepare the journal entries on Peanut’s books for the acquisition of Snoopy on January 1, 20X8, as well as any normal equity method entry(ies) related to the investment in Snoopy Company during 20X8.
Prepare a consolidation worksheet for 20X8.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

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