Python Corporation buys 80 percent of Shark Company on January 1, 2013, for $150,000. At the time, Shark’s common stock was $100,000 and retained earnings totaled $80,000. It was determined that Shark’s assets and liabilities were all at their fair value except for land. The trial balances of Python and Shark on December 31, 2013, are listed below. Python Corporation Shark Company Debit Credit Debit Credit Cash $ 25,000 $ 10,000 Receivables (net) 10,000 11,000 Inventory, January 1 15,000 9,000 Investment in S 150,000 Plant and equipment (net 225,000 185,000 Land 100,000 80,000 Accounts payable $ 24,000 $ 10,000 Other liabilities 80,000 100,000 Common stock ($10 par) 250,000 100,000 Retained earnings, January 1 135,000 80,000 Dividends declared 15,000 20,000 Sales 130,000 75,000 Dividend income 16,000 Purchases 55,000 25,000 Expenses 40,000 ________ 25,000 ________ $635,000 $635,000 $365,000 $365,000 Inventory, December 31 $12,000 $10,000 Find the difference between implied and book value Record the entries in Python’s books to reflect its transactions with Shark in 2013, assuming the cost method. To record initial investment To record P’s share of S’s dividends Prepare the workpaper entries on December 31, 2013 To eliminate P’s share of S’s equity To allocate the difference between implied and book value To eliminate P’s share of S’s dividends
Python Corporation buys 80 percent of Shark Company on January 1, 2013, for $150,000. At the time, Shark’s common stock was $100,000 and
Python Corporation Shark Company
Debit Credit Debit Credit
Cash $ 25,000 $ 10,000
Receivables (net) 10,000 11,000
Inventory, January 1 15,000 9,000
Investment in S 150,000
Plant and equipment (net 225,000 185,000
Land 100,000 80,000
Accounts payable $ 24,000 $ 10,000
Other liabilities 80,000 100,000
Common stock ($10 par) 250,000 100,000
Retained earnings, January 1 135,000 80,000
Dividends declared 15,000 20,000
Sales 130,000 75,000
Dividend income 16,000
Purchases 55,000 25,000
Expenses 40,000 ________ 25,000 ________
$635,000 $635,000 $365,000 $365,000
Inventory, December 31 $12,000 $10,000
- Find the difference between implied and book value
- Record the entries in Python’s books to reflect its transactions with Shark in 2013, assuming the cost method.
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To record initial investment |
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To record P’s share of S’s dividends |
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- Prepare the workpaper entries on December 31, 2013
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To eliminate P’s share of S’s equity |
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To allocate the difference between implied and book value |
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To eliminate P’s share of S’s dividends |
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