EBK ADVANCED FINANCIAL ACCOUNTING
11th Edition
ISBN: 8220102796096
Author: Christensen
Publisher: YUZU
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Chapter 3, Problem 3.28P
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.
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Instructions
At a total cost of $6,950,000, Herrera Corporation acquired 229,500 shares of Tran Corp. common stock
as a long-term investment. Herrera Corporation uses the equity method of accounting for this investment.
Tran Corp. has 850,000 shares of common stock outstanding, including the shares acquired by Herrera
Corporation.
Required:
A. Journalize the entries by Herrera Corporation on December 31 to record the following
information (refer to the Chart of Accounts for exact wording of account titles):
1. Tran Corp. reports net income of $974,000 for the current period.
2. A cash dividend of $0.28 per common share is paid by Tran Corp. during the current
period.
B. Why is the equity method appropriate for the Tran Corp. investment?
Subject- accounting
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
10,000
Selling & Administrative Expense
225,000
40,000
Dividends Declared
100,000
20,000
Accumulated Depreciation
$ 450,000
$ 20,000
Accounts Payable
75,000
60,000
Bonds Payable
200,000
85,000
Common Stock
500,000
200,000
Retained Earnings
225,000
100,000
Sales
800,000
250,000…
Chapter 3 Solutions
EBK ADVANCED FINANCIAL ACCOUNTING
Ch. 3 - What is the basic idea underlying the preparation...Ch. 3 - How might consolidated statements help an investor...Ch. 3 - Prob. 3.3QCh. 3 - Prob. 3.4QCh. 3 - Prob. 3.5QCh. 3 - Prob. 3.6QCh. 3 - Prob. 3.7QCh. 3 - Prob. 3.8QCh. 3 - Prob. 3.9QCh. 3 - Prob. 3.10Q
Ch. 3 - Prob. 3.11QCh. 3 - Prob. 3.12QCh. 3 - What is meant by indirect control? Give an...Ch. 3 - Prob. 3.14QCh. 3 - Prob. 3.15QCh. 3 - Prob. 3.16QCh. 3 - Prob. 3.17QCh. 3 - Prob. 3.18QCh. 3 - Prob. 3.1CCh. 3 - Prob. 3.2CCh. 3 - Prob. 3.3CCh. 3 - Prob. 3.6CCh. 3 - Prob. 3.7CCh. 3 - Prob. 3.1.1ECh. 3 - Prob. 3.1.2ECh. 3 - Prob. 3.1.3ECh. 3 - Prob. 3.1.4ECh. 3 - Multiple-Choice Question on Variable Interest...Ch. 3 - Multiple-Choice Question on Variable Interest...Ch. 3 - Prob. 3.2.3ECh. 3 - Prob. 3.2.4ECh. 3 - Prob. 3.3.1ECh. 3 - Prob. 3.3.2ECh. 3 - Prob. 3.3.3ECh. 3 - Prob. 3.4.1ECh. 3 - Prob. 3.4.2ECh. 3 - Prob. 3.4.3ECh. 3 - Prob. 3.4.4ECh. 3 - Prob. 3.5ECh. 3 - Prob. 3.6ECh. 3 - Prob. 3.7ECh. 3 - Prob. 3.8ECh. 3 - Prob. 3.9ECh. 3 - Reporting for a Variable Interest Entity Gamble...Ch. 3 - Prob. 3.11ECh. 3 - Prob. 3.12ECh. 3 - Prob. 3.13ECh. 3 - Noncontrolling Interest Sanderson Corporation...Ch. 3 - Prob. 3.15ECh. 3 - Prob. 3.16ECh. 3 - Prob. 3.17ECh. 3 - Prob. 3.18ECh. 3 - Prob. 3.19.1PCh. 3 - Prob. 3.19.2PCh. 3 - Prob. 3.20PCh. 3 - Prob. 3.21PCh. 3 - Prob. 3.22PCh. 3 - Prob. 3.23PCh. 3 - Parent Company and Consolidated Balances Exacto...Ch. 3 - Prob. 3.25PCh. 3 - Prob. 3.26PCh. 3 - Prob. 3.27PCh. 3 - Prob. 3.28PCh. 3 - Prob. 3.29PCh. 3 - Consolidated Worksheet at End of the First Year of...Ch. 3 - Prob. 3.31P
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- 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 10,000 Selling & Administrative Expense 225,000 40,000 Dividends Declared 100,000 20,000 Accumulated Depreciation $ 450,000 $ 20,000 Accounts Payable 75,000 60,000 Bonds Payable 200,000 85,000 Common Stock 500,000 200,000 Retained Earnings 225,000 100,000 Sales 800,000 250,000…arrow_forwardPeanut 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…arrow_forwardParesarrow_forward
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- Gioia Company acquired some of the 65,000 shares of outstanding common stock (no par) of Tristezza Corporation during the current year as a long-term investment. The annual accounting period for both companies ends December 31. The following transactions occurred during the current year: Jan. 10 Purchased 17,875 shares of Tristezza common stock at $11 per share. Dec. 31 a. Received the current year financial statements of Tristezza Corporation that reported net income of $80,000. b. Tristezza Corporation declared a cash dividend of $0.60 per share. c. Tristezza Corporation paid the cash dividend declared in (b). d. Determined the market price of Tristezza stock to be $10 per share. Required: 2. Prepare the journal entries for each of these transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)arrow_forwardAccounting for equity investments On January 6, 20Y8, Bulldog Co. purchased 34% of the outstanding common stock of Gator Co. for $225,000. Gator Co. paid total dividends of $20,000 to all shareholders on June 30, 20Y8. Gator had a net loss of $55,000 for 20Y8. a. Journalize Bulldog's purchase of the stock, receipt of the dividends, and the adjusting entry for the equity loss in Gator Co. stock. If an amount box does not require an entry, leave it blank. 20Y8 Jan. 6 20Y8 June 30 20Y8 Dec. 31 b. Compute the balance of Investment in Gator Co. Stock on December 31, 20Y8.arrow_forwardPeanut Company acquired 80 percent of Snoopy Company's outstanding common stock for $300,000 on January 1, 20X8, when the book value of Snoopy's net assets was equal to $375,000. Peanut uses the equity method to account for investments. The following trial balance summarizes the financial position and operations for Peanut and Snoopy as of December 31, 20X9 Snoopy Company Cash Accounts Receivable Inventory Investment in Snoopy Company Land Buildings and Equipment Cost of Goods Sold Depreciation Expense Selling & Administrative Expense Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Common Stock Retained Earnings Sales Income from Snoopy Company Total Peanut Company Debit $ 270,000 191,000 196,000 315,000 207,000 714,000 375,000 46,000 225,000 213,000 $2,752,000 Credit $494,000 56,000 133,000 493,000 656,600 842,000 77,400 $ 2,752,000 Debit $ 85,000 90,000 100,000 0 96,000 181,000 169,000 12,000 35,250 38,000 $ 806,250 Required: a. Prepare any equity method…arrow_forward
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