Prime Corporation acquired 80 percent of Steak Company's voting shares on January 1, 20X4, for $280,000 in cash and marketablesecurities. At that date, the noncontrolling Interest had a fair value of $70,000 and Steak reported net assets of $300,000. AssumePrime uses the fully adjusted equity method. Trial balances for the two companies on December 31, 20X7, are as follows:Steak CompanyItenCashAccounts ReceivableInventoryBuildings and EquipmentInvestment in Steak CompanyCost of Goods SoldDepreciation ExpenseOther ExpensesDividends DeclaredAccumulated DepreciationAccounts PayableBonds PayableBond PremiumConnon StockAdditional Paid-in CapitalRetained EarningsSalesOther IncomeIncome from Steak CompanyTotalNoABCDELLFGEvent1Additional Information1. The full amount of the differential at acquisition was assigned to buildings and equipment with a remaining 10-year economic life.2. Prime and Steak regularly purchase Inventory from each other. During 20X6, Steak Company sold Inventory costing $40,000 toPrime Corporation for $60,000, and Prime resold 60 percent of the Inventory In 20X6 and 40 percent In 20X7. Also in 20X6, Primesold Inventory costing $20,000 to Steak for $26,000. Steak resold two-thirds of the Inventory in 20X6 and one-third In 20x7.3. During 20X7, Steak sold Inventory costing $30,000 to Prime for $45,000, and Prime sold Items purchased for $9,000 to Steak for$12,000. Before the end of the year, Prime resold one-third of the Inventory it purchased from Steak in 20X7. Steak continues tohold all the units purchased from Prime during 20X7.4. Steak owes Prime $10,000 on account on December 31, 20X7.25. Assume that both companies use straight-line depreciation and that no property, plant, and equipment has be purchased sincethe acquisition.Required:3a. Prepare the 20X7 journal entries recorded on Prime's books related to its Investment in Steak if Prime uses the equity method.Note: If no entry is required for a transaction/event, select "No Journal entry required" in the first account field.5Prime Corporation6Debit$ 130,30080,000170,0007600,000293,000416,00030,00024,00050,000$ 1,793,300CashInvestment in Steak CompanyIncome from Steak CompanyDepreciation expenseAccumulated depreciationAnswer is not complete.General JournalInvestment in Steak CompanyCredit$ 310,000100,000300,000200,000337,500500,00020,40025,400$ 1,793,300Investment in Steak CompanyInvestment in Steak CompanyInvestment in Steak CompanyIncome from Steak CompanyDebit$ 10,00070,000110,000400,000Depreciation expenseInvestment in Steak Company202,00020,00018,00025,000$ 855,00033XX3X››3*Credit$120,00015,200100,000X4,888100,00020,000215,000250,00030,000$ 855,00020,000Debit32,000 ✓Credit32,000✔20,000✔b. Prepare all consolidation entries needed to complete a consolidation worksheet as of December 31, 20X7.Note: If no entry is required for a transaction/event, select "No Journal entry required" in the first account field.

Prime Corporation acquired 80 percent of Steak Company's voting shares on January 1, 20X4, for $280,000 in cash and marketable securities. At that date, the noncontrolling Interest had a fair value of $70,000 and Steak reported net assets of $300,000. Assume Prime uses the fully adjusted equity method. Trial balances for the two companies on December 31, 20X7, are as follows: Steak Company Iten Cash Accounts Receivable Inventory Buildings and Equipment Investment in Steak Company Cost of Goods Sold Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Bond Premium Connon Stock Prime Corporation Debit $ 130,300 80,000 170,000 600,000 293,000 416,000 30,000 24,000 50,000 Credit $ 310,000 100,000 300,000 200 000 Debit $ 10,000 70,000 110,000 400,000 202,000 20,000 18,000 25,000 Credit $ 120,000 15,200 100,000 4,800 100 000

Prime Corporation acquired 80 percent of Steak Company's voting shares on January 1, 20X4, for $280,000 in cash and marketable securities. At that date, the noncontrolling Interest had a fair value of $70,000 and Steak reported net assets of $300,000. Assume Prime uses the fully adjusted equity method. Trial balances for the two companies on December 31, 20X7, are as follows: Steak Company Iten Cash Accounts Receivable Inventory Buildings and Equipment Investment in Steak Company Cost of Goods Sold Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Bond Premium Connon Stock Prime Corporation Debit $ 130,300 80,000 170,000 600,000 293,000 416,000 30,000 24,000 50,000 Credit $ 310,000 100,000 300,000 200 000 Debit $ 10,000 70,000 110,000 400,000 202,000 20,000 18,000 25,000 Credit $ 120,000 15,200 100,000 4,800 100 000

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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