Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 3, Problem 3.30P
Consolidated Worksheet at End of the First Year of Ownership (Equity Method)
Paper Company acquired 80 percent of Scissor Company’s outstanding common stock for$296,000 on January 1, 20X8, when the book value of Scissor’s net assets was equal to $370,000.Paper uses the equity method to account for investments.
Required
a. Prepare any equity-method entry(ies) related to the investment in Scissor Company during20X8.
b. Prepare a consolidation worksheet for 20X8 in good form.
a.
Expert Solution
To determine
Introduction:
The consolidated balance sheet and the worksheets are the computed tools that are used to calculate the retained earnings and the dividend produced by the subsidiaries towards its parent company.
To prepare: A journal entry by equity method for the investment in S company in the year
Explanation of Solution
| Equity method entry onP company books | Amount ($) | Amount ($) |
| Investment in S co. Dr. | ||
| Cash Cr. | ||
| (To recordthe initial investment in S co.) | ||
| Investment in S co. Dr. | ||
| Income from S co. Cr. | ||
| (To record share of P co in S co.) | ||
| Cash Dr. | ||
| Investment in S company. Cr. | ||
| (To record P co.’s share in S Co.’s dividend) |
b.
Expert Solution
To determine
Introduction:
The consolidated balance sheet and the worksheets are the computed tools that are used to calculate the retained earnings and the dividend produced by the subsidiaries towards its parent company.
To prepare:The consolidated worksheet for the final values.
Explanation of Solution
| Book value calculation | |||||||
| NCI | + | P co | = | Common stock | + | Retained earnings | |
| Book value | |||||||
| Net income | |||||||
| Dividend | |||||||
| Ending book value |
| Income statement | P co | S co | Eliminated Dr. | Eliminated Cr. | Consolidated |
| Cash | |||||
| Accounts received | |||||
| Inventory | |||||
| Investment in scissor co | |||||
| Land | |||||
| Building and equipment | |||||
| Less accumulated depreciation | |||||
| Total assets | |||||
| Accountspayable | |||||
| Bonds | |||||
| Common stocks | |||||
| Retained earnings | |||||
| NCI in NA of Snoopy Co. | |||||
| Total liabilities |
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Students have asked these similar questions
Subject- accounting
Subject :- Accounting
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?
Chapter 3 Solutions
Advanced Financial Accounting
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