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Loose Leaf for Fundamentals of Advanced Accounting
7th Edition
ISBN: 9781260151879
Author: Hoyle, Joe Ben; Schaefer, Thomas; Doupnik, Timothy
Publisher: McGraw-Hill Education
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Question
Chapter 5, Problem 31P
a.
To determine
Show how Company M determined the $411,000 Investment in Company S account balance.
a.
Expert Solution
![Check Mark](/static/check-mark.png)
Explanation of Solution
Particulars | Amount | Amount |
Consideration transferred on 01/01/2017 | $ 372,000 | |
Reported income of Company S | $ 60,000 | |
Patents amortization | $ (7,000) | |
Amortization of Customer list | $ (3,000) | |
Adjusted income of Company S | $ 50,000 | |
Ownership percent of Company P | 60% | |
Share of Company M in Income of Company S | $ 30,000 | |
Deferred profit of sale occurred in 2017 | $ (10,000) | |
Balance as on 12/31/2017 | $ 392,000 | |
Reported income of Company S | $ 60,000 | |
Patents amortization | $ (7,000) | |
Amortization of Customer list | $ (3,000) | |
Adjusted income of Company S in 2018 | $ 50,000 | |
Ownership percent of Company P | 60% | |
Share of Company P in Income of Company S | $ 30,000 | |
Profit of 2017 recognized | $ 10,000 | |
Deferred profit of 2018 | $ (12,000) | |
Equity in earnings of Company S in 2017 | $ 28,000 | |
Share of Company M in dividends of Company S in 2017 | $ (9,000) | |
Balance as on 12/31/2017 | $ 411,000 |
Table: (1)
b.
To determine
Prepare a consolidated worksheet to determine appropriate balances for external financial reporting as of December 31, 2018.
b.
Expert Solution
![Check Mark](/static/check-mark.png)
Explanation of Solution
The consolidated worksheet to determine appropriate balances for external financial reporting as of December 31, 2018 is as follows:
Company M and Company S | ||||||
Consolidation Worksheet | ||||||
Year ending December 31, 2018 | ||||||
Income statement | Company M | Company S | Debit | Credit | Non-controlling interest | Consolidated Balances |
Revenues | $ (700,000) | $ (335,000) | $ 160,000 | $ (875,000) | ||
Cost of goods sold | $ 460,000 | $ 205,000 | $ 12,000 | $ 10,000 | $ 507,000 | |
$ 160,000 | ||||||
Operating expense | $ 188,000 | $ 70,000 | $ 10,000 | $ 268,000 | ||
Equity in income of Company S | $ (28,000) | $ 28,000 | $ - | |||
Net income | $ (80,000) | $ (60,000) | ||||
Consolidated net income | $ (100,000) | |||||
Share of non-controlling interest in net income | $ (20,000) | $ 20,000 | ||||
Share of controlling interest in net income | $ (80,000) | |||||
| ||||||
Cash | $ 248,000 | $ 148,000 | $ 396,000 | |||
Inventory | $ 233,000 | $ 129,000 | $ 12,000 | $ 350,000 | ||
Investment in Company S | $ 411,000 | |||||
Building | $ 308,000 | $ 202,000 | $ 510,000 | |||
Equipment | $ 220,000 | $ 86,000 | $ 306,000 | |||
Patents | $ 20,000 | $ 70,000 | $ 14,000 | $ 76,000 | ||
Customer list | $ 45,000 | $ 6,000 | $ 39,000 | |||
| $ 185,000 | $ 185,000 | ||||
Total assets | $ 1,420,000 | $ 585,000 | $ 1,862,000 | |||
Liabilities | $ (390,000) | $ (160,000) | $ (550,000) | |||
Common stock | $ (300,000) | $ (100,000) | $ 100,000 | $ (300,000) | ||
| $ (730,000) | $ (325,000) | $ (730,000) | |||
Non-controlling interest in Company S | $ 268,000 | |||||
$ 14,000 | ||||||
$ 282,000 | $ (282,000) | |||||
Total liabilities and equity | $ (1,420,000) | $ (585,000) | $ 1,862,000 |
Table: (2)
Working note:
Statement of retained earnings | Company M | Company S | Debit | Credit | Non-controlling interest | Consolidated Balances |
Retained earnings on 01/01 | $ (695,000) | $ (280,000) | $ 280,000 | $ (695,000) | ||
Net Income | $ (80,000) | $ (60,000) | $ (80,000) | |||
Dividends declared | $ 45,000 | $ 15,000 | $ 9,000 | $ 6,000 | $ 45,000 | |
Retained earnings on 31/12 | $ (730,000) | $ (325,000) | $ (730,000) |
Table: (3)
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Chapter 5 Solutions
Loose Leaf for Fundamentals of Advanced Accounting
Ch. 5 - Prob. 1QCh. 5 - Prob. 2QCh. 5 - Prob. 3QCh. 5 - Prob. 4QCh. 5 - Prob. 5QCh. 5 - Prob. 6QCh. 5 - Prob. 7QCh. 5 - Prob. 8QCh. 5 - Prob. 9QCh. 5 - Prob. 10Q
Ch. 5 - Prob. 11QCh. 5 - 12. Why does an intra-entity sale of a depreciable...Ch. 5 - Prob. 13QCh. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - Prob. 3PCh. 5 - Prob. 4PCh. 5 - Prob. 5PCh. 5 - 6. Use the same information as in problem (5)...Ch. 5 - Prob. 7PCh. 5 - Prob. 8PCh. 5 - Prob. 9PCh. 5 - Prob. 10PCh. 5 - Prob. 11PCh. 5 - Prob. 12PCh. 5 - Prob. 13PCh. 5 - Prob. 14PCh. 5 - Prob. 15PCh. 5 - Prob. 16PCh. 5 - Prob. 17PCh. 5 - Prob. 18PCh. 5 - Prob. 19PCh. 5 - Prob. 20PCh. 5 - Prob. 21PCh. 5 - Prob. 22PCh. 5 - Prob. 23PCh. 5 - Prob. 24PCh. 5 - Prob. 25PCh. 5 - Prob. 26PCh. 5 - Prob. 27PCh. 5 - Prob. 28PCh. 5 - Prob. 29PCh. 5 - Prob. 30PCh. 5 - Prob. 31PCh. 5 - Prob. 32PCh. 5 - Prob. 33PCh. 5 - Prob. 34PCh. 5 - Prob. 35PCh. 5 - Prob. 36PCh. 5 - Prob. 1DYSCh. 5 - Prob. 2DYS
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