(2) Prepare the Eliminating and Adjusting Entries, the Schedules and Worksheet necessary to produce theconsolidated financial statements of Payday Company and its subsidiary for the year ended December31, 2019. Payday Company acquired an 80% interest in Sunday Company for $272,000 cash on January 1, 2018.Sunday had the following Balance Sheet on the date of acquisition:Sunday CompanyBalance SheetJanuary 1, 2018Assets ($)Liabilities (S)90,000 Accounts Payable200,000 Bonds Payable50,000 Discount on Bonds Payable10,000 Common Stock ($10 par)Retained Earnings350,000 Total Liabilities & EquityAccounts Receivable50,00050,000Depreciable Fixed AssetsLand(1,620)100,000Goodwill151,620Total Assets350,000The excess of the price paid over book value is attributable to the Depreciable Fixed Assets, which have afair value of $260,000. The Depreciable Assets have a 10-year remaining life.Sunday sold a piece of Land to Payday for $60,000 on January 1, 2019. It cost Sunday $50,000 to purchasethe land from an external party.On January 1, 2020, Sunday held merchandise acquired from Payday for $20,000. This beginning inventoryhad an applicable gross profit of 40%. During 2020, Payday sold $60,000 worth of merchandise to Sunday.Sunday held $30,000 of this merchandise at December 31, 2020. This ending inventory and an applicablegross profit of 35%. Sunday owed Payday $23,000 on December 31, 2020 as a result of these intercompanysales.On January 1, 2020, Payday held merchandise acquired from Sunday for $10,000. This beginning inventoryhad an applicable gross profit of 25%. During 2020, Sunday sold $40,000 worth of merchandise to Payday.Payday held $6,000 of this merchandise at December 31, 2020. This ending inventory had an applicablegross profit of 30%. Payday owed Sunday $11,000 on December 31, 2020 as a result of these intercompanysales.Sunday sold bonds on January 1, 2017 with a face value of $50,000. These bonds carry a coupon interestrate of 8% and term to maturity of 5 years. The bonds were issued when the market rate was 9%. WhenPayday purchased these bonds on January 1, 2019, the market rate was 10%. Both companies use theEffective Interest method to amortize the premium/discount on the bonds.

Adjusting Enteries Accounting journal entries made conclusion of accounting period after a trial…

Sunday had the following Balance Sheet on the date of acquisition: Sunday Company Balance Sheet January 1, 2018 Assets (S) Liab Accounts Receivable Depreciable Fixed Assets Land 90,000 Accounts Payable 200,000 Bonds Payable 50,000 Discount on Bonds Pay 10,000 Common Stock ($10 pa Retained Earnings Goodwill Total Assets 350,000 Total Liabilities & Eq

Sunday had the following Balance Sheet on the date of acquisition: Sunday Company Balance Sheet January 1, 2018 Assets (S) Liab Accounts Receivable Depreciable Fixed Assets Land 90,000 Accounts Payable 200,000 Bonds Payable 50,000 Discount on Bonds Pay 10,000 Common Stock ($10 pa Retained Earnings Goodwill Total Assets 350,000 Total Liabilities & Eq

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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