Powder Company spent $240,000 to acquire all of Sawmill Corporation's stock on January 1, 20X2. On December 31, 20X4, the trial balances of the two companies were as follows: Cash Accounts Receivable Land Item Buildings and Equipment Investment in Sawmill Corporation Cost of Services Provided Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Taxes Payable Notes Payable Common Stock Retained Earnings Service Revenue Income from Sawmill Corporation Powder Company Debit $ 74,000 130,000 60,000 500,000 268,000 470,000 35,000 57,000 30,000 $1,624,000 Credit $ 265,000 71,000 58,000 100,000 200,000 292,000 610,000 28,000 $1,624,000 Sawmill Corporation Debit $ 42,000 53,000 50,000 350,000 130,000 18,000 60,000 12,000 $ 715,000 Credit $ 93,000 17,000 60,000 85,000 100,000 120,000 240,000 $ 715,000 Sawmill Corporation reported retained earnings of $100,000 at the date of acquisition. The difference between the acquisition price and underlying book value is assigned to buildings and equipment with a remaining economic life of 10 years from the date of acquisition. Sawmill's accumulated depreciation on the acquisition date was $25,000. At December 31, 20X4, Sawmill owed Powder $2,500. Required: a. Prepare the following journal entries recorded by Powder with regard to its investment in Sawmill during 20X4. b. Prepare all consolidation entries required on December 31, 20X4, to prepare consolidated financial statements. c. Prepare a three-part consolidation worksheet as of December 31, 20X4.
Powder Company spent $240,000 to acquire all of Sawmill Corporation's stock on January 1, 20X2. On December 31, 20X4, the trial balances of the two companies were as follows: Cash Accounts Receivable Land Item Buildings and Equipment Investment in Sawmill Corporation Cost of Services Provided Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Taxes Payable Notes Payable Common Stock Retained Earnings Service Revenue Income from Sawmill Corporation Powder Company Debit $ 74,000 130,000 60,000 500,000 268,000 470,000 35,000 57,000 30,000 $1,624,000 Credit $ 265,000 71,000 58,000 100,000 200,000 292,000 610,000 28,000 $1,624,000 Sawmill Corporation Debit $ 42,000 53,000 50,000 350,000 130,000 18,000 60,000 12,000 $ 715,000 Credit $ 93,000 17,000 60,000 85,000 100,000 120,000 240,000 $ 715,000 Sawmill Corporation reported retained earnings of $100,000 at the date of acquisition. The difference between the acquisition price and underlying book value is assigned to buildings and equipment with a remaining economic life of 10 years from the date of acquisition. Sawmill's accumulated depreciation on the acquisition date was $25,000. At December 31, 20X4, Sawmill owed Powder $2,500. Required: a. Prepare the following journal entries recorded by Powder with regard to its investment in Sawmill during 20X4. b. Prepare all consolidation entries required on December 31, 20X4, to prepare consolidated financial statements. c. Prepare a three-part consolidation worksheet as of December 31, 20X4.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Q.15.
Subject :- Account
Transcribed Image Text:Powder Company spent $240,000 to acquire all of Sawmill Corporation's stock on January 1, 20X2. On December 31, 20X4, the trial
balances of the two companies were as follows:
Cash
Accounts Receivable
Land
Item
Buildings and Equipment
Investment in Sawmill Corporation
Cost of Services Provided
Depreciation Expense
Other Expenses
Dividends Declared
Accumulated Depreciation
Accounts Payable
Taxes Payable
Notes Payable
Common Stock
Retained Earnings
Service Revenue
Income from Sawmill Corporation
Powder Company
Debit
$ 74,000
130,000
60,000
500,000
268,000
470,000
35,000
57,000
30,000
$ 1,624,000
Credit
$ 265,000
71,000
58,000
100,000
200,000
292,000
610,000
28,000
$ 1,624,000
Sawmill Corporation
Debit
$ 42,000
53,000
50,000
350,000
130,000
18,000
60,000
12,000
$ 715,000
Credit
$ 93,000
17,000
60,000
85,000
100,000
120,000
240,000
$ 715,000
Sawmill Corporation reported retained earnings of $100,000 at the date of acquisition. The difference between the acquisition price
and underlying book value is assigned to buildings and equipment with a remaining economic life of 10 years from the date of
acquisition. Sawmill's accumulated depreciation on the acquisition date was $25,000. At December 31, 20X4, Sawmill owed Powder
$2,500.
Required:
a. Prepare the following journal entries recorded by Powder with regard to its investment in Sawmill during 20X4.
b. Prepare all consolidation entries required on December 31, 20X4, to prepare consolidated financial statements.
c. Prepare a three-part consolidation worksheet as of December 31, 20X4.
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