FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
Bartleby Related Questions Icon

Related questions

bartleby

Concept explainers

Question

On January 1, 2015, Paro Company purchases 80% of the common stock of Solar Company for $320,000. On this date, Solar has common stock, other paid-in capital in excess of par, and retained earnings of $50,000, $100,000, and $150,000, respectively. Net income and dividends for two years for Solar Company are as follows:
                                                             2015          2016
Net income . . . . . . . . . . . . . . . . . . . . .$60,000      $90,000
Dividends. . . . . . . . . . . . . . . . . . . . . . .  20,000         30,000

On January 1, 2015, the only undervalued tangible assets of Solar are inventory and the building. Inventory, for which FIFO is used, is worth $10,000 more than cost. The inventory is sold in 2015. The building, which is worth $30,000 more than book value, has a remaining life of 10 years, and straight-line depreciation is used. The remaining excess of cost over book value is attributable to goodwill.
The trial balances for Paro and Solar are as follows:

  Paro Company Solar Company

Inventory, December 31

Other Current Assets

Investment in Solar Company

Land

Buildings and Equipment

Accumulated Depreciation

Goodwill

Other Intangibles.

Current Liabilities

Bonds Payable

Other Long-Term Liabilities

Common Stock—Paro Company

Other Paid-In Capital in Excess of Par-Paro Co.

Retained Earnings—Paro Company

Common Stock—Solar Company

Other Paid-In Capital in Excess of Par-Solar Co.

Retained Earnings—Solar Company.

Net Sales

Cost of Goods Sold

Operating Expenses

Subsidiary Income

Dividends Declared—Paro Company

Dividends Declared—Solar Company

Note 1: To be calculated.

100,000

136,000

Note 1

50,000

350,000

(100,000)

 

20,000

(120,000)

 

(200,000)

(200,000)

(100,000)

(203,600)

 

 

 

(520,000)

300,000

120,000

Note 1

50,000

 

 

50,000

180,000

 

50,000

320,000

(60,000)

 

 

(40,000)

(100,000)

 

 

 

 

(50,000)

(100,000)

(190,000)

(450,000)

260,000

100,000

 

 

30,000

 

1. Prepare a value analysis and a determination and distribution of excess schedule.
2. Paro Company carries the investment in Solar Company under the sophisticated equity method. In general journal form, record the entries that would be made to apply the equity method in 2015 and 2016.
3. Compute the balance that should appear in Investment in Solar Company and in Subsidiary Income on December 31, 2016 (the second year). Fill in these amounts on Paro Company’s trial balance for 2016.
4. Complete a worksheet for consolidated financial statements for 2016. Include columns for eliminations and adjustments, consolidated income, NCI, controlling retained earnings, and consolidated balance sheet.

Expert Solution
Check Mark
Knowledge Booster
Background pattern image
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education