Problem 1: On January 1, 2020, Pond Co. acquired 40% of the outstanding voting common shares of Ramp Co. for $700,000. On that date, Ramp reported assets and liabilities with book values of $2.2 million and $700,000, respectively. A building owned by Ramp had an appraised value of $300,000, although it had a book value of only $120,000. This building had a 10-year remaining life and no salvage value. It was being depreciated on the straight-line basis. Ramp generated a loss of $120,000 in 2021, and paid a cash dividend of $70,000 to its stockholders. During 2020, Ramp sold inventory to Pond for $96,000 at a 37.5% gross profit. Of this balance, $24,000 was still unsold at the end of 2020. In 2021, Ramp again sold inventory to Pond for $180,000 at a 40% gross profit. Of this balance, $60,000 was still unsold at the end of 2021. Required: Prepare all of Pond's journal entries for 2021 in relation to Ramp Co. Assume the equity method is appropriate for use. Show all your calculations clearly. No credit without any supporting work.

Problem 1: On January 1, 2020, Pond Co. acquired 40% of the outstanding voting common shares of Ramp Co. for $700,000. On that date, Ramp reported assets and liabilities with book values of $2.2 million and $700,000, respectively. A building owned by Ramp had an appraised value of $300,000, although it had a book value of only $120,000. This building had a 10-year remaining life and no salvage value. It was being depreciated on the straight-line basis. Ramp generated a loss of $120,000 in 2021, and paid a cash dividend of $70,000 to its stockholders. During 2020, Ramp sold inventory to Pond for $96,000 at a 37.5% gross profit. Of this balance, $24,000 was still unsold at the end of 2020. In 2021, Ramp again sold inventory to Pond for $180,000 at a 40% gross profit. Of this balance, $60,000 was still unsold at the end of 2021. Required: Prepare all of Pond's journal entries for 2021 in relation to Ramp Co. Assume the equity method is appropriate for use. Show all your calculations clearly. No credit without any supporting work.

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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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

Problem 1: On January 1, 2020, Pond Co. acquired 40% of the outstanding voting common
shares of Ramp Co. for $700,000. On that date, Ramp reported assets and liabilities with book
values of $2.2 million and $700,000, respectively. A building owned by Ramp had an appraised
value of $300,000, although it had a book value of only $120,000. This building had a 10-year
remaining life and no salvage value. It was being depreciated on the straight-line basis.
Ramp generated a loss of $120,000 in 2021, and paid a cash dividend of $70,000 to its
stockholders.
During 2020, Ramp sold inventory to Pond for $96,000 at a 37.5% gross profit. Of this balance,
$24,000 was still unsold at the end of 2020. In 2021, Ramp again sold inventory to Pond for
$180,000 at a 40% gross profit. Of this balance, $60,000 was still unsold at the end of 2021.
Required:
Prepare all of Pond's journal entries for 2021 in relation to Ramp Co. Assume the equity
method is appropriate for use. Show all your calculations clearly. No credit without any
supporting work.

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