Prince Corporation acquired 100 percent of Sword Company on January 1, 20X7, for $195,000. The trial balances for the twocompanies on December 31, 20X7, included the following amounts:ItemCashAccounts ReceivableInventoryLandBuildings and EquipmentInvestment in Sword CompanyCost of Goods SoldDepreciation Expense.Other ExpensesDividends DeclaredAccumulated DepreciationAccounts PayableMortgages PayableCommon StockRetained EarningsSalesIncome from Sword CompanyAdditional Information$Prince CorporationDebit84, 00056, 000175,00082, 000491, 000248, 000491, 00024,00072, 00052, 000$1,775, 000$Credit146, 00057,000186, 000287, 000338, 000688, 00073, 000$1,775, 000Sword CompanyDebit$ 27,00061,00022,000157, 000256, 00014,00072,00020, 000$738, 000Credit$ 70,00022, 00086, 00046, 00096, 000418, 000$738, 0001. 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 appliedto 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 fairvalue 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 atransaction/event, select "No journal entry required" in the first account field.) Income StatementSalesLess: COGSLess: Depreciation expenseLess: Other expensesIncome from Sword Co.Net IncomeStatement of Retained EarningsBeginning balanceNet incomeLess: Dividends declaredEnding BalanceBalance SheetAssetsCashAccounts receivableInventoryLandBuildings & equipmentLess: Accumulated depreciationInvestment in Sword Co.GoodwillTotal AssetsLiabilities & EquityAccounts payableMortgages payableCommon stockRetained earningsTotal Liabilities & EquityPRINCE CORPORATION AND SUBSIDIARYConsolidated Financial Statements WorksheetDecember 31, 20X7Prince CorpSword CoConsolidation EntriesCRDRConsolidated

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Answered: Prince Corporation acquired 100 percent…

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

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