Prince Corporation acquired 100 percent of Sword Company on January 1, 20X7, for $195,000. The trial balances for the two companies on December 31, 20X7, included the following amounts:

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
Prince Corporation acquired 100 percent of Sword Company on January 1, 20X7, for $195,000. The trial balances for the two
companies on December 31, 20X7, included the following amounts:
Item
Cash
Accounts Receivable
Inventory
Land
Buildings and Equipment
Investment in Sword Company
Cost of Goods Sold
Depreciation Expense.
Other Expenses
Dividends Declared
Accumulated Depreciation
Accounts Payable
Mortgages Payable
Common Stock
Retained Earnings
Sales
Income from Sword Company
Additional Information
$
Prince Corporation
Debit
84, 000
56, 000
175,000
82, 000
491, 000
248, 000
491, 000
24,000
72, 000
52, 000
$1,775, 000
$
Credit
146, 000
57,000
186, 000
287, 000
338, 000
688, 000
73, 000
$1,775, 000
Sword Company
Debit
$ 27,000
61,000
22,000
157, 000
256, 000
14,000
72,000
20, 000
$738, 000
Credit
$ 70,000
22, 000
86, 000
46, 000
96, 000
418, 000
$738, 000
1. On January 1, 20X7, Sword reported net assets with a book value of $142,000. A total of $20,000 of the acquisition price is applied
to goodwill, which was not impaired in 20X7.
2. Sword's depreciable assets had an estimated economic life of 11 years on the date of combination. The difference between fair
value and book value of tangible assets is related entirely to buildings and equipment.
3. Prince used the equity-method in accounting for its investment in Sword.
4. Detailed analysis of receivables and payables showed that Sword owed Prince $17,000 on December 31, 20X7.
Required:
a. Prepare all journal entries recorded by Prince with regard to its investment in Sword during 20X7. (If no entry is required for a
transaction/event, select "No journal entry required" in the first account field.)
Transcribed Image Text:Prince Corporation acquired 100 percent of Sword Company on January 1, 20X7, for $195,000. The trial balances for the two companies on December 31, 20X7, included the following amounts: Item Cash Accounts Receivable Inventory Land Buildings and Equipment Investment in Sword Company Cost of Goods Sold Depreciation Expense. Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Mortgages Payable Common Stock Retained Earnings Sales Income from Sword Company Additional Information $ Prince Corporation Debit 84, 000 56, 000 175,000 82, 000 491, 000 248, 000 491, 000 24,000 72, 000 52, 000 $1,775, 000 $ Credit 146, 000 57,000 186, 000 287, 000 338, 000 688, 000 73, 000 $1,775, 000 Sword Company Debit $ 27,000 61,000 22,000 157, 000 256, 000 14,000 72,000 20, 000 $738, 000 Credit $ 70,000 22, 000 86, 000 46, 000 96, 000 418, 000 $738, 000 1. On January 1, 20X7, Sword reported net assets with a book value of $142,000. A total of $20,000 of the acquisition price is applied to goodwill, which was not impaired in 20X7. 2. Sword's depreciable assets had an estimated economic life of 11 years on the date of combination. The difference between fair value and book value of tangible assets is related entirely to buildings and equipment. 3. Prince used the equity-method in accounting for its investment in Sword. 4. Detailed analysis of receivables and payables showed that Sword owed Prince $17,000 on December 31, 20X7. Required: a. Prepare all journal entries recorded by Prince with regard to its investment in Sword during 20X7. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Income Statement
Sales
Less: COGS
Less: Depreciation expense
Less: Other expenses
Income from Sword Co.
Net Income
Statement of Retained Earnings
Beginning balance
Net income
Less: Dividends declared
Ending Balance
Balance Sheet
Assets
Cash
Accounts receivable
Inventory
Land
Buildings & equipment
Less: Accumulated depreciation
Investment in Sword Co.
Goodwill
Total Assets
Liabilities & Equity
Accounts payable
Mortgages payable
Common stock
Retained earnings
Total Liabilities & Equity
PRINCE CORPORATION AND SUBSIDIARY
Consolidated Financial Statements Worksheet
December 31, 20X7
Prince Corp
Sword Co
Consolidation Entries
CR
DR
Consolidated
Transcribed Image Text:Income Statement Sales Less: COGS Less: Depreciation expense Less: Other expenses Income from Sword Co. Net Income Statement of Retained Earnings Beginning balance Net income Less: Dividends declared Ending Balance Balance Sheet Assets Cash Accounts receivable Inventory Land Buildings & equipment Less: Accumulated depreciation Investment in Sword Co. Goodwill Total Assets Liabilities & Equity Accounts payable Mortgages payable Common stock Retained earnings Total Liabilities & Equity PRINCE CORPORATION AND SUBSIDIARY Consolidated Financial Statements Worksheet December 31, 20X7 Prince Corp Sword Co Consolidation Entries CR DR Consolidated
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 3 images

Blurred answer
Knowledge Booster
Corporate Distributions and Adjustments
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
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education