Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
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Question
Chapter 3, Problem 3.27P
a.
To determine
Concept introduction
The consolidation process is the process of adding all the financial values of all the associate companies into one final financial report as of the parent company.
To prepare: The equity method entry related to the investment.
a.
Expert Solution
Answer to Problem 3.27P
The equity method entries are recorded.
Explanation of Solution
Equity method
| Particular | Dr $ | Cr $ |
| Investment in S corporation Dr. | ||
| Cash Cr. | ||
| Being initial investment in S co recorded | ||
| Investment Dr. | ||
| Income from S Cr. | ||
| Being P co.’s 90% share of S co.’s 2008 income recorded | ||
| Cash Dr. | ||
| Investment in S corporation Cr. Being P co.’s 90% share of S co.’s 2008 dividend recorded |
b.
To determine
Concept introduction
Consolidated balance sheets and worksheets are the tools that are used to calculate the
To prepare: The consolidate worksheet of the final values by the company.
b.
Expert Solution
Answer to Problem 3.27P
The consolidate worksheet is provided and discussed.
Explanation of Solution
Book Value:
| NCI10% | + | P CO.90% | = | Common Stock | + | Retained Earnings | ||
| Original Book Value | ||||||||
| +Net Income | ||||||||
| -Dividends | ||||||||
| Ending book Value | ||||||||
Consolidated worksheet:
| Income statement | P co | S co | Eliminate DR | EliminateCR | consolidated |
| Sales | |||||
| Less: COGS | |||||
| Less: Depreciation | |||||
| Less: Other Expenses | |||||
| Income from S co. | |||||
| Consolidated Net Income | |||||
| NCI in Net Income | |||||
| Controlling interest in net income |
| Statement of Retained Earnings | P co | S co | Eliminate DR | EliminateCR | consolidated |
| Beginning Balance | |||||
| Net Income | |||||
| Less: Dividends Declared | |||||
| Ending Balance | |||||
| Balance Sheet | P co | S co | Eliminate DR | EliminateCR | consolidated |
| Cash | |||||
| Account Receivables | |||||
| Inventory | |||||
| Investment In S Co. | |||||
| Land | |||||
| Buildings & Equipment | |||||
| Less: Accumulated Depreciation | |||||
| Total Assets | |||||
| Account Payable | |||||
| Bonds Payable | |||||
| Common Stock | |||||
| Retained Earnings | |||||
| NCI in NA S Co. | |||||
| Total Liabilities |
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Subject- accounting
Peanut Company acquired 90 percent of Snoopy Company's outstanding common stock for $287,100 on January 1, 20X8, when the
book value of Snoopy's net assets was equal to $319,000. Peanut uses the equity method to account for investments. Trial balance
data for Peanut and Snoopy as of December 31, 20X8, follow:
Peanut Company
Snoopy Company
Cash
Accounts Receivable
Inventory
Debit
$ 163,000
Credit
173,000
209,000
Debit
$ 87,000
67,000
93,000
Credit
Investment in Snoopy Company
Land
Buildings and Equipment.
342,000
205,000
714,000
93,000
192,000
Cost of Goods Sold
193,000
113,000
Depreciation Expense
42,000
10,000
selling & Administrative Expense
205,000
Dividends Declared
99,000
Accumulated Depreciation
$ 443,000
Accounts Payable
Bonds Payable
Common Stock
Retained Earnings
Sales
Income from Snoopy Company
Total
32,000
22,000
$ 20,000
72,000
57,000
200,000
75,000
493,000
199,000
279,300
120,000
783,000
238,000
74,700
0
$ 2,345,000
$ 2,345,000
$ 709,000
$ 709,000
Required:
a. Prepare any…
Peanut Company acquired 90 percent of Snoopy Company’s outstanding common stock for $270,000 on January 1, 20X8, when the book value of Snoopy’s net assets was equal to $300,000. Peanut uses the equity method to account for investments. Trial balance data for Peanut and Snoopy as of December 31, 20X8, follow:
Peanut Company
Snoopy Company
Debit
Credit
Debit
Credit
Cash
$ 158,000
$ 80,000
Accounts Receivable
165,000
65,000
Inventory
200,000
75,000
Investment in Snoopy Company
319,500
0
Land
200,000
100,000
Buildings and Equipment
700,000
200,000
Cost of Goods Sold
200,000
125,000
Depreciation Expense
50,000
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Selling & Administrative Expense
225,000
40,000
Dividends Declared
100,000
20,000
Accumulated Depreciation
$ 450,000
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Accounts Payable
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60,000
Bonds Payable
200,000
85,000
Common Stock
500,000
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Retained Earnings
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Sales
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Chapter 3 Solutions
Advanced Financial Accounting
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