When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation. The consolidation entries needed to prepare consolidation balance sheet .

Question

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Answer 1

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 5, Problem 5.29P

a

To determine

Introduction: When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation.

The consolidation entries needed to prepare consolidation balance sheet.

a

Expert Solution

Explanation of Solution

Consolidation entries

Particulars	Debit $	Credit $
Investment in S Corporation	102,200
Cash		102,200
(Recorded initial investment in S Corp)

Elimination entries:
Common stock	40,000
Retained earnings	85,000
Investment in S Corporation		87,500
Non-controlling interest in net assets of S		37,500
(Elimination of beginning investment in S by reversal)

Inventory	6,000
Buildings & equipment	15,000
Investment in S Corporation		14,700
Non-controlling interest in net assets of S		6,300
(Reclassification of differential in assets)

Accounts payable	12,500
Accounts receivable		12,500
(Intercompany receivable and payable eliminated)

Accumulated depreciation	80,000
Building and equipment		80,000
(Depreciation on building and equipment recorded)

Initial investment recognized by debit entry in investment account
Beginning investment in S Eliminated by reversal

Investment in S Corporation: $87,500 = ($40,000 + $85,000) × .70

Non controlling interest in net assets of S : $37,500 = ($40,000 + $85,000) × .30

Excess differential reclassification

Inventory: $6,000 = $81,000 − $75,000

Buildings and equipment: $15,000 = ($185,000 − ($250,000 − $80,000)

Intercompany receivable and payable eliminated by setoff
Accumulated depreciation recognized

b

To determine

Introduction: When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation.

The consolidated worksheet for December 31, 20X4.

b

Expert Solution

Answer to Problem 5.29P

Net assets and liability/equity as per worksheet $938,800

Explanation of Solution

P and S

Consolidated balance sheet worksheet

December 31, 20X4

			Elimination
	P $	S $	Debit $	Credit $	Consolidation $
Cash	50,300	21,000			71,300
Accounts receivable	90,000	44,000		12,500	121,500
Inventory	130,000	75,000	6,000		211,000
Land	60,000	30,000			90,000
Buildings and equipment	410,000	250,000	15,000	80,000	595,000
Less: Accumulated depreciation	(150,000)	(80,000)	80,000		(150,000)
Investment in S Corp	102,200			87,500
				14,700
Total Assets	692,500	340,000	101,000	194,700	938,800

Accounts payable	152,500	35,000	12,500		175,000
Mortgage payable	250,000	180,000			430,000
Common stock	80,000	40,000	40,000		80,000
Retained earnings	210,000	85,000	85,000		210,000
Non-controlling in net assets S				37,500
				6,300	43,800
Total Liabilities & Equity	692,500	340,000	101,000	194,700	938,800

c

To determine

Introduction: When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation.

The consolidated balance sheet for December 31, 20X4

c

Expert Solution

Answer to Problem 5.29P

Net assets and liability/equity as per worksheet $938,800

Explanation of Solution

P and S

Consolidated balance sheet

December 31, 20X4

	$	$
Cash		71,300
Accounts receivable		121,500
Inventory		211,000
Land		90,000
Buildings and equipment	595,000
Less: Accumulated depreciation	(150,000)
		445,000
Total Assets		938,800

Accounts payable		175,000
Mortgage payable		430,000
Stockholders’ equity:
Common stock	80,000
Retained earnings	210,000
Total controlling interest	290,000
Non-controlling in net assets S	43,800
Total stockholders’ equity		333,800
Total Liabilities & Equity		938,800

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Students have asked these similar questions

Recently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: What impact would the write-down of inventory have had on Abercrombie's assets, Liabilities, and Equity?

Need answer general Accounting

Provide correct answer of this question answer general Accounting

Answer 2

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 5, Problem 5.29P

a

To determine

Introduction: When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation.

The consolidation entries needed to prepare consolidation balance sheet.

a

Expert Solution

Explanation of Solution

Consolidation entries

Particulars	Debit $	Credit $
Investment in S Corporation	102,200
Cash		102,200
(Recorded initial investment in S Corp)

Elimination entries:
Common stock	40,000
Retained earnings	85,000
Investment in S Corporation		87,500
Non-controlling interest in net assets of S		37,500
(Elimination of beginning investment in S by reversal)

Inventory	6,000
Buildings & equipment	15,000
Investment in S Corporation		14,700
Non-controlling interest in net assets of S		6,300
(Reclassification of differential in assets)

Accounts payable	12,500
Accounts receivable		12,500
(Intercompany receivable and payable eliminated)

Accumulated depreciation	80,000
Building and equipment		80,000
(Depreciation on building and equipment recorded)

Initial investment recognized by debit entry in investment account
Beginning investment in S Eliminated by reversal

Investment in S Corporation: $87,500 = ($40,000 + $85,000) × .70

Non controlling interest in net assets of S : $37,500 = ($40,000 + $85,000) × .30

Excess differential reclassification

Inventory: $6,000 = $81,000 − $75,000

Buildings and equipment: $15,000 = ($185,000 − ($250,000 − $80,000)

Intercompany receivable and payable eliminated by setoff
Accumulated depreciation recognized

b

To determine

Introduction: When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation.

The consolidated worksheet for December 31, 20X4.

b

Expert Solution

Answer to Problem 5.29P

Net assets and liability/equity as per worksheet $938,800

Explanation of Solution

P and S

Consolidated balance sheet worksheet

December 31, 20X4

			Elimination
	P $	S $	Debit $	Credit $	Consolidation $
Cash	50,300	21,000			71,300
Accounts receivable	90,000	44,000		12,500	121,500
Inventory	130,000	75,000	6,000		211,000
Land	60,000	30,000			90,000
Buildings and equipment	410,000	250,000	15,000	80,000	595,000
Less: Accumulated depreciation	(150,000)	(80,000)	80,000		(150,000)
Investment in S Corp	102,200			87,500
				14,700
Total Assets	692,500	340,000	101,000	194,700	938,800

Accounts payable	152,500	35,000	12,500		175,000
Mortgage payable	250,000	180,000			430,000
Common stock	80,000	40,000	40,000		80,000
Retained earnings	210,000	85,000	85,000		210,000
Non-controlling in net assets S				37,500
				6,300	43,800
Total Liabilities & Equity	692,500	340,000	101,000	194,700	938,800

c

To determine

Introduction: When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation.

The consolidated balance sheet for December 31, 20X4

c

Expert Solution

Answer to Problem 5.29P

Net assets and liability/equity as per worksheet $938,800

Explanation of Solution

P and S

Consolidated balance sheet

December 31, 20X4

	$	$
Cash		71,300
Accounts receivable		121,500
Inventory		211,000
Land		90,000
Buildings and equipment	595,000
Less: Accumulated depreciation	(150,000)
		445,000
Total Assets		938,800

Accounts payable		175,000
Mortgage payable		430,000
Stockholders’ equity:
Common stock	80,000
Retained earnings	210,000
Total controlling interest	290,000
Non-controlling in net assets S	43,800
Total stockholders’ equity		333,800
Total Liabilities & Equity		938,800

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Answer 3

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 5, Problem 5.29P

a

To determine

Introduction: When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation.

The consolidation entries needed to prepare consolidation balance sheet.

a

Expert Solution

Explanation of Solution

Consolidation entries

Particulars	Debit $	Credit $
Investment in S Corporation	102,200
Cash		102,200
(Recorded initial investment in S Corp)

Elimination entries:
Common stock	40,000
Retained earnings	85,000
Investment in S Corporation		87,500
Non-controlling interest in net assets of S		37,500
(Elimination of beginning investment in S by reversal)

Inventory	6,000
Buildings & equipment	15,000
Investment in S Corporation		14,700
Non-controlling interest in net assets of S		6,300
(Reclassification of differential in assets)

Accounts payable	12,500
Accounts receivable		12,500
(Intercompany receivable and payable eliminated)

Accumulated depreciation	80,000
Building and equipment		80,000
(Depreciation on building and equipment recorded)

Initial investment recognized by debit entry in investment account
Beginning investment in S Eliminated by reversal

Investment in S Corporation: $87,500 = ($40,000 + $85,000) × .70

Non controlling interest in net assets of S : $37,500 = ($40,000 + $85,000) × .30

Excess differential reclassification

Inventory: $6,000 = $81,000 − $75,000

Buildings and equipment: $15,000 = ($185,000 − ($250,000 − $80,000)

Intercompany receivable and payable eliminated by setoff
Accumulated depreciation recognized

b

To determine

Introduction: When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation.

The consolidated worksheet for December 31, 20X4.

b

Expert Solution

Answer to Problem 5.29P

Net assets and liability/equity as per worksheet $938,800

Explanation of Solution

P and S

Consolidated balance sheet worksheet

December 31, 20X4

			Elimination
	P $	S $	Debit $	Credit $	Consolidation $
Cash	50,300	21,000			71,300
Accounts receivable	90,000	44,000		12,500	121,500
Inventory	130,000	75,000	6,000		211,000
Land	60,000	30,000			90,000
Buildings and equipment	410,000	250,000	15,000	80,000	595,000
Less: Accumulated depreciation	(150,000)	(80,000)	80,000		(150,000)
Investment in S Corp	102,200			87,500
				14,700
Total Assets	692,500	340,000	101,000	194,700	938,800

Accounts payable	152,500	35,000	12,500		175,000
Mortgage payable	250,000	180,000			430,000
Common stock	80,000	40,000	40,000		80,000
Retained earnings	210,000	85,000	85,000		210,000
Non-controlling in net assets S				37,500
				6,300	43,800
Total Liabilities & Equity	692,500	340,000	101,000	194,700	938,800

c

To determine

Introduction: When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation.

The consolidated balance sheet for December 31, 20X4

c

Expert Solution

Answer to Problem 5.29P

Net assets and liability/equity as per worksheet $938,800

Explanation of Solution

P and S

Consolidated balance sheet

December 31, 20X4

	$	$
Cash		71,300
Accounts receivable		121,500
Inventory		211,000
Land		90,000
Buildings and equipment	595,000
Less: Accumulated depreciation	(150,000)
		445,000
Total Assets		938,800

Accounts payable		175,000
Mortgage payable		430,000
Stockholders’ equity:
Common stock	80,000
Retained earnings	210,000
Total controlling interest	290,000
Non-controlling in net assets S	43,800
Total stockholders’ equity		333,800
Total Liabilities & Equity		938,800

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Answer 4

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 5, Problem 5.29P

a

To determine

Introduction: When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation.

The consolidation entries needed to prepare consolidation balance sheet.

a

Expert Solution

Explanation of Solution

Consolidation entries

Particulars	Debit $	Credit $
Investment in S Corporation	102,200
Cash		102,200
(Recorded initial investment in S Corp)

Elimination entries:
Common stock	40,000
Retained earnings	85,000
Investment in S Corporation		87,500
Non-controlling interest in net assets of S		37,500
(Elimination of beginning investment in S by reversal)

Inventory	6,000
Buildings & equipment	15,000
Investment in S Corporation		14,700
Non-controlling interest in net assets of S		6,300
(Reclassification of differential in assets)

Accounts payable	12,500
Accounts receivable		12,500
(Intercompany receivable and payable eliminated)

Accumulated depreciation	80,000
Building and equipment		80,000
(Depreciation on building and equipment recorded)

Initial investment recognized by debit entry in investment account
Beginning investment in S Eliminated by reversal

Investment in S Corporation: $87,500 = ($40,000 + $85,000) × .70

Non controlling interest in net assets of S : $37,500 = ($40,000 + $85,000) × .30

Excess differential reclassification

Inventory: $6,000 = $81,000 − $75,000

Buildings and equipment: $15,000 = ($185,000 − ($250,000 − $80,000)

Intercompany receivable and payable eliminated by setoff
Accumulated depreciation recognized

b

To determine

Introduction: When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation.

The consolidated worksheet for December 31, 20X4.

b

Expert Solution

Answer to Problem 5.29P

Net assets and liability/equity as per worksheet $938,800

Explanation of Solution

P and S

Consolidated balance sheet worksheet

December 31, 20X4

			Elimination
	P $	S $	Debit $	Credit $	Consolidation $
Cash	50,300	21,000			71,300
Accounts receivable	90,000	44,000		12,500	121,500
Inventory	130,000	75,000	6,000		211,000
Land	60,000	30,000			90,000
Buildings and equipment	410,000	250,000	15,000	80,000	595,000
Less: Accumulated depreciation	(150,000)	(80,000)	80,000		(150,000)
Investment in S Corp	102,200			87,500
				14,700
Total Assets	692,500	340,000	101,000	194,700	938,800

Accounts payable	152,500	35,000	12,500		175,000
Mortgage payable	250,000	180,000			430,000
Common stock	80,000	40,000	40,000		80,000
Retained earnings	210,000	85,000	85,000		210,000
Non-controlling in net assets S				37,500
				6,300	43,800
Total Liabilities & Equity	692,500	340,000	101,000	194,700	938,800

c

To determine

Introduction: When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation.

The consolidated balance sheet for December 31, 20X4

c

Expert Solution

Answer to Problem 5.29P

Net assets and liability/equity as per worksheet $938,800

Explanation of Solution

P and S

Consolidated balance sheet

December 31, 20X4

	$	$
Cash		71,300
Accounts receivable		121,500
Inventory		211,000
Land		90,000
Buildings and equipment	595,000
Less: Accumulated depreciation	(150,000)
		445,000
Total Assets		938,800

Accounts payable		175,000
Mortgage payable		430,000
Stockholders’ equity:
Common stock	80,000
Retained earnings	210,000
Total controlling interest	290,000
Non-controlling in net assets S	43,800
Total stockholders’ equity		333,800
Total Liabilities & Equity		938,800

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Answer 5

Chapter 5, Problem 5.29P

a

To determine

Introduction: When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation.

The consolidation entries needed to prepare consolidation balance sheet.

a

Expert Solution

Explanation of Solution

Consolidation entries

Particulars	Debit $	Credit $
Investment in S Corporation	102,200
Cash		102,200
(Recorded initial investment in S Corp)

Elimination entries:
Common stock	40,000
Retained earnings	85,000
Investment in S Corporation		87,500
Non-controlling interest in net assets of S		37,500
(Elimination of beginning investment in S by reversal)

Inventory	6,000
Buildings & equipment	15,000
Investment in S Corporation		14,700
Non-controlling interest in net assets of S		6,300
(Reclassification of differential in assets)

Accounts payable	12,500
Accounts receivable		12,500
(Intercompany receivable and payable eliminated)

Accumulated depreciation	80,000
Building and equipment		80,000
(Depreciation on building and equipment recorded)

Initial investment recognized by debit entry in investment account
Beginning investment in S Eliminated by reversal

Investment in S Corporation: $87,500 = ($40,000 + $85,000) × .70

Non controlling interest in net assets of S : $37,500 = ($40,000 + $85,000) × .30

Excess differential reclassification

Inventory: $6,000 = $81,000 − $75,000

Buildings and equipment: $15,000 = ($185,000 − ($250,000 − $80,000)

Intercompany receivable and payable eliminated by setoff
Accumulated depreciation recognized

b

To determine

Introduction: When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation.

The consolidated worksheet for December 31, 20X4.

b

Expert Solution

Answer to Problem 5.29P

Net assets and liability/equity as per worksheet $938,800

Explanation of Solution

P and S

Consolidated balance sheet worksheet

December 31, 20X4

			Elimination
	P $	S $	Debit $	Credit $	Consolidation $
Cash	50,300	21,000			71,300
Accounts receivable	90,000	44,000		12,500	121,500
Inventory	130,000	75,000	6,000		211,000
Land	60,000	30,000			90,000
Buildings and equipment	410,000	250,000	15,000	80,000	595,000
Less: Accumulated depreciation	(150,000)	(80,000)	80,000		(150,000)
Investment in S Corp	102,200			87,500
				14,700
Total Assets	692,500	340,000	101,000	194,700	938,800

Accounts payable	152,500	35,000	12,500		175,000
Mortgage payable	250,000	180,000			430,000
Common stock	80,000	40,000	40,000		80,000
Retained earnings	210,000	85,000	85,000		210,000
Non-controlling in net assets S				37,500
				6,300	43,800
Total Liabilities & Equity	692,500	340,000	101,000	194,700	938,800

c

To determine

Introduction: When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation.

The consolidated balance sheet for December 31, 20X4

c

Expert Solution

Answer to Problem 5.29P

Net assets and liability/equity as per worksheet $938,800

Explanation of Solution

P and S

Consolidated balance sheet

December 31, 20X4

	$	$
Cash		71,300
Accounts receivable		121,500
Inventory		211,000
Land		90,000
Buildings and equipment	595,000
Less: Accumulated depreciation	(150,000)
		445,000
Total Assets		938,800

Accounts payable		175,000
Mortgage payable		430,000
Stockholders’ equity:
Common stock	80,000
Retained earnings	210,000
Total controlling interest	290,000
Non-controlling in net assets S	43,800
Total stockholders’ equity		333,800
Total Liabilities & Equity		938,800

Answer 6

Chapter 5, Problem 5.29P

a

To determine

Introduction: When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation.

The consolidation entries needed to prepare consolidation balance sheet.

a

Expert Solution

Explanation of Solution

Consolidation entries

Particulars	Debit $	Credit $
Investment in S Corporation	102,200
Cash		102,200
(Recorded initial investment in S Corp)

Elimination entries:
Common stock	40,000
Retained earnings	85,000
Investment in S Corporation		87,500
Non-controlling interest in net assets of S		37,500
(Elimination of beginning investment in S by reversal)

Inventory	6,000
Buildings & equipment	15,000
Investment in S Corporation		14,700
Non-controlling interest in net assets of S		6,300
(Reclassification of differential in assets)

Accounts payable	12,500
Accounts receivable		12,500
(Intercompany receivable and payable eliminated)

Accumulated depreciation	80,000
Building and equipment		80,000
(Depreciation on building and equipment recorded)

Initial investment recognized by debit entry in investment account
Beginning investment in S Eliminated by reversal

Investment in S Corporation: $87,500 = ($40,000 + $85,000) × .70

Non controlling interest in net assets of S : $37,500 = ($40,000 + $85,000) × .30

Excess differential reclassification

Inventory: $6,000 = $81,000 − $75,000

Buildings and equipment: $15,000 = ($185,000 − ($250,000 − $80,000)

Intercompany receivable and payable eliminated by setoff
Accumulated depreciation recognized

Answer 7

Chapter 5, Problem 5.29P

a

To determine

Introduction: When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation.

The consolidation entries needed to prepare consolidation balance sheet.

Answer 8

a

Expert Solution

Explanation of Solution

Consolidation entries

Particulars	Debit $	Credit $
Investment in S Corporation	102,200
Cash		102,200
(Recorded initial investment in S Corp)

Elimination entries:
Common stock	40,000
Retained earnings	85,000
Investment in S Corporation		87,500
Non-controlling interest in net assets of S		37,500
(Elimination of beginning investment in S by reversal)

Inventory	6,000
Buildings & equipment	15,000
Investment in S Corporation		14,700
Non-controlling interest in net assets of S		6,300
(Reclassification of differential in assets)

Accounts payable	12,500
Accounts receivable		12,500
(Intercompany receivable and payable eliminated)

Accumulated depreciation	80,000
Building and equipment		80,000
(Depreciation on building and equipment recorded)

Initial investment recognized by debit entry in investment account
Beginning investment in S Eliminated by reversal

Investment in S Corporation: $87,500 = ($40,000 + $85,000) × .70

Non controlling interest in net assets of S : $37,500 = ($40,000 + $85,000) × .30

Excess differential reclassification

Inventory: $6,000 = $81,000 − $75,000

Buildings and equipment: $15,000 = ($185,000 − ($250,000 − $80,000)

Intercompany receivable and payable eliminated by setoff
Accumulated depreciation recognized

Answer 9

a

Expert Solution

Answer 10

a

Expert Solution

Answer 11

Expert Solution

Answer 12

b

To determine

Introduction: When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation.

The consolidated worksheet for December 31, 20X4.

b

Expert Solution

Answer to Problem 5.29P

Net assets and liability/equity as per worksheet $938,800

Explanation of Solution

P and S

Consolidated balance sheet worksheet

December 31, 20X4

			Elimination
	P $	S $	Debit $	Credit $	Consolidation $
Cash	50,300	21,000			71,300
Accounts receivable	90,000	44,000		12,500	121,500
Inventory	130,000	75,000	6,000		211,000
Land	60,000	30,000			90,000
Buildings and equipment	410,000	250,000	15,000	80,000	595,000
Less: Accumulated depreciation	(150,000)	(80,000)	80,000		(150,000)
Investment in S Corp	102,200			87,500
				14,700
Total Assets	692,500	340,000	101,000	194,700	938,800

Accounts payable	152,500	35,000	12,500		175,000
Mortgage payable	250,000	180,000			430,000
Common stock	80,000	40,000	40,000		80,000
Retained earnings	210,000	85,000	85,000		210,000
Non-controlling in net assets S				37,500
				6,300	43,800
Total Liabilities & Equity	692,500	340,000	101,000	194,700	938,800

Answer 13

b

To determine

Introduction: When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation.

The consolidated worksheet for December 31, 20X4.

Answer 14

b

Expert Solution

Answer to Problem 5.29P

Net assets and liability/equity as per worksheet $938,800

Answer 15

b

Expert Solution

Answer 16

b

Expert Solution

Answer 17

Expert Solution

Answer 18

Explanation of Solution

P and S

Consolidated balance sheet worksheet

December 31, 20X4

			Elimination
	P $	S $	Debit $	Credit $	Consolidation $
Cash	50,300	21,000			71,300
Accounts receivable	90,000	44,000		12,500	121,500
Inventory	130,000	75,000	6,000		211,000
Land	60,000	30,000			90,000
Buildings and equipment	410,000	250,000	15,000	80,000	595,000
Less: Accumulated depreciation	(150,000)	(80,000)	80,000		(150,000)
Investment in S Corp	102,200			87,500
				14,700
Total Assets	692,500	340,000	101,000	194,700	938,800

Accounts payable	152,500	35,000	12,500		175,000
Mortgage payable	250,000	180,000			430,000
Common stock	80,000	40,000	40,000		80,000
Retained earnings	210,000	85,000	85,000		210,000
Non-controlling in net assets S				37,500
				6,300	43,800
Total Liabilities & Equity	692,500	340,000	101,000	194,700	938,800

Answer 19

c

To determine

Introduction: When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation.

The consolidated balance sheet for December 31, 20X4

c

Expert Solution

Answer to Problem 5.29P

Net assets and liability/equity as per worksheet $938,800

Explanation of Solution

P and S

Consolidated balance sheet

December 31, 20X4

	$	$
Cash		71,300
Accounts receivable		121,500
Inventory		211,000
Land		90,000
Buildings and equipment	595,000
Less: Accumulated depreciation	(150,000)
		445,000
Total Assets		938,800

Accounts payable		175,000
Mortgage payable		430,000
Stockholders’ equity:
Common stock	80,000
Retained earnings	210,000
Total controlling interest	290,000
Non-controlling in net assets S	43,800
Total stockholders’ equity		333,800
Total Liabilities & Equity		938,800

Answer 20

c

To determine

Introduction: When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation.

The consolidated balance sheet for December 31, 20X4

Answer 21

c

Expert Solution

Answer to Problem 5.29P

Net assets and liability/equity as per worksheet $938,800

Answer 22

c

Expert Solution

Answer 23

c

Expert Solution

Answer 24

Expert Solution

Answer 25

Explanation of Solution

P and S

Consolidated balance sheet

December 31, 20X4

	$	$
Cash		71,300
Accounts receivable		121,500
Inventory		211,000
Land		90,000
Buildings and equipment	595,000
Less: Accumulated depreciation	(150,000)
		445,000
Total Assets		938,800

Accounts payable		175,000
Mortgage payable		430,000
Stockholders’ equity:
Common stock	80,000
Retained earnings	210,000
Total controlling interest	290,000
Non-controlling in net assets S	43,800
Total stockholders’ equity		333,800
Total Liabilities & Equity		938,800