Chapter 3, Problem 3.31P

a.

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 scissor company in the year $2009$ .

Explanation of Solution

Particulars	Amount ($)	Amount ($)
Equity method entry on books
Investment in SCo. Dr.	$85,600$
Income from SCo. Cr.		$85,600$
(To record P co. $80\%$ share of the S co. $2009$ income)
Cash Dr.	$24,000$
Investment in the SCo. Cr.		$24,000$
(To record PCo. share in S Co. dividend)

b.

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 $20\%$	+	P co.	=	Common stock	+	Retained earnings
Book value	$87,600$		$350,400$		$250,000$		$188,000$
Net income	$21,400$		$85,600$				$107,000$
Dividend	$6000$		$24,000$				$30,000$
Ending book value	$103,000$		$412,000$		$250,000$		$265,000$

Income statement	P co.	S co.	Eliminated Dr	Eliminated Cr.	Consolidated
Cash	$295,000$	$116,000$			$411,000$
Accounts received	$165,000$	$97,000$			$262,000$
Inventory	$193,000$	$115,000$			$308,000$
Investment in SCo.	$412,000$			$412,000$	$0$
Land	$250,000$	$125,000$			$375,000$
Building and equipment	$875,000$	$250,000$		$24,000$	$1,101,000$
Less accumulated depreciation	$630,000$	$48,000$	$24,000$		$654,000$
Total assets	$1,560,000$	$655,000$	$24,000$	$436,000$	$1,803,000$
Account payable	$85,000$	$40,000$			$125,000$
Bonds	$150,000$	$100,000$			$250,000$
Common stocks	$625,000$	$250,000$	$250,000$		$625,000$
Retained earnings	$700,000$	$265,000$	$295,000$	$30,000$	$700,000$
NCI in NA in SCo.				$103,000$	$103,000$
Total liabilities	$1,560,000$	$655,000$	$545,000$	$133,000$	$1,803,000$