P acquired 90% of S's stock of S on 1/1/x1 for $430,000 when it was selling for $21/share S balance sheet on 1/1/x1: ASSETS LIAB. & SE CASH 10,000 CURRENT LIAB 30,000 ACCTS REC 25,000 COMMON STOCK 100,000 INVENTORY 90,000 PIC 15,000 TOTAL CA 125,000 R/E 60,000 BUILDING 80,000 TOTAL SE 175,000 TOTAL ASSETS TOTAL LIAB & SE 205,000 205,000 Market values were equal to book values, except the building has a market value of 220,000. The building had a remaining useful life of 20 years. P's share of the Goodwill implied in the purchase price was $146,500. The fair value of NCI was $42,000. The resulting value of goodwill for the total company was $157,000 During 20x1: S declared dividends of $30,000 of which $10,000 was unpaid at year end. S reported income of $100,000. At year end, goodwill is reviewed for impairment and its value is determined to be $141,300. Under the equity method, P would have reported income from S calculated as follows: P share of reported profits Depreciation adjustment Goodwill amortization $90,000 (6,300) (14,130) $69,570 You now know how to handle the consolidation under the assumption that P uses the equity method and reports INCOME FROM S of 69,570 in the income statement. 1. Assume that P uses the cost method instead. Make all journal entries on P's books for 20x1.
P acquired 90% of S's stock of S on 1/1/x1 for $430,000 when it was selling for $21/share S balance sheet on 1/1/x1: ASSETS LIAB. & SE CASH 10,000 CURRENT LIAB 30,000 ACCTS REC 25,000 COMMON STOCK 100,000 INVENTORY 90,000 PIC 15,000 TOTAL CA 125,000 R/E 60,000 BUILDING 80,000 TOTAL SE 175,000 TOTAL ASSETS TOTAL LIAB & SE 205,000 205,000 Market values were equal to book values, except the building has a market value of 220,000. The building had a remaining useful life of 20 years. P's share of the Goodwill implied in the purchase price was $146,500. The fair value of NCI was $42,000. The resulting value of goodwill for the total company was $157,000 During 20x1: S declared dividends of $30,000 of which $10,000 was unpaid at year end. S reported income of $100,000. At year end, goodwill is reviewed for impairment and its value is determined to be $141,300. Under the equity method, P would have reported income from S calculated as follows: P share of reported profits Depreciation adjustment Goodwill amortization $90,000 (6,300) (14,130) $69,570 You now know how to handle the consolidation under the assumption that P uses the equity method and reports INCOME FROM S of 69,570 in the income statement. 1. Assume that P uses the cost method instead. Make all journal entries on P's books for 20x1.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter15: Contributed Capital
Section: Chapter Questions
Problem 17E
Related questions
Question
Transcribed Image Text:P acquired 90% of S's stock of S on 1/1/x1 for $430,000 when it was selling for $21/share
S balance sheet on 1/1/x1:
ASSETS
LIAB. & SE
CASH
10,000
CURRENT LIAB
30,000
ACCTS REC
25,000
COMMON STOCK 100,000
INVENTORY
90,000
PIC
15,000
TOTAL CA
125,000
R/E
60,000
BUILDING
80,000
TOTAL SE
175,000
TOTAL ASSETS
TOTAL LIAB & SE 205,000
205,000
Market values were equal to book values, except the building has a market value of
220,000. The building had a remaining useful life of 20 years.
P's share of the Goodwill implied in the purchase price was $146,500. The fair value of
NCI was $42,000. The resulting value of goodwill for the total company was $157,000
During 20x1: S declared dividends of $30,000 of which $10,000 was unpaid at year end.
S reported income of $100,000.
At year end, goodwill is reviewed for impairment and its value is determined to be
$141,300.
Under the equity method, P would have reported income from S calculated as follows:
P share of reported profits
Depreciation adjustment
Goodwill amortization
$90,000
(6,300)
(14,130)
$69,570
You now know how to handle the consolidation under the assumption that P uses the
equity method and reports INCOME FROM S of 69,570 in the income statement.
1.
Assume that P uses the cost method instead. Make all journal entries on P's books
for 20x1.
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