Pop Corporation acquired 70 percent of Soda Company's voting common shares on January 1, 20X2, for $109,200. At that date, the noncontrolling interest had a fair value of $46,800 and Soda reported $71,000 of common stock outstanding and retained earnings of $30,000. The differential is assigned to buildings and equipment, which had a fair value $20,000 higher than book value and a remaining 10-year life, and to patents, which had a fair value $35,000 higher than book value and a remaining life of five years at the date of the business combination. Trial balances for the companies as of December 31, 20X3, are as follows: ง c Item Cash & Accounts Receivable Inventory Land Buildings & Equipment Investment in Soda Company Cost of Goods Sold Depreciation Expense Interest Expense Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Bond Premium Common Stock Pop Corporation Debit Credit $ 20,400 170,000 85,000 Soda Company Debit Credit $ 26,600 40,000 45,000 390,000 265,000 113,920 191,000 84,800 25,000 20,000 21,000 7,200 35,000 20,000 $ 145,000 97,400 $ 90,000 40,000 260,400 100,000 125,000 Retained Earnings 132,900 Sales 265,000 2,600 71,000 65,000 140,000 Other Income 14,600 Income from Soda Company 11,020 $1,051,320 $1,051,320 $508,600 $508,600 Show Transcribed Text On December 31, 20X2, Soda purchased inventory for $35,000 and sold it to Pop for $50,000. Pop resold $30,000 of the inventory (i.e., $30,000 of the $50,000 acquired from Soda) during 20X3 and had the remaining balance in inventory at December 31, 20X3. During 20X3, Soda sold inventory purchased for $56,000 to Pop for $80,000, and Pop resold all but $23,000 of its purchase. On March 10, 20X3, Pop sold inventory purchased for $15,000 to Soda for $30,000. Soda sold all but $7,500 of the inventory prior to December 31, 20X3. Assume Pop uses the fully adjusted equity method, that both companies use straight-line depreciation, and that no property, plant, and equipment has been purchased since the acquisition. Required: a. Prepare all consolidation entries needed to prepare a full set of consolidated financial statements at December 31, 20X3, for Pop and Soda. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) b. Prepare a three-part consolidation worksheet for 20X3. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)

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
Chapter13: Investments And Long-term Receivables
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Pop Corporation acquired 70 percent of Soda Company's voting common shares on January 1, 20X2, for $109,200. At that
date, the noncontrolling interest had a fair value of $46,800 and Soda reported $71,000 of common stock outstanding
and retained earnings of $30,000. The differential is assigned to buildings and equipment, which had a fair value $20,000
higher than book value and a remaining 10-year life, and to patents, which had a fair value $35,000 higher than book
value and a remaining life of five years at the date of the business combination. Trial balances for the companies as of
December 31, 20X3, are as follows:
ง
c
Item
Cash & Accounts Receivable
Inventory
Land
Buildings & Equipment
Investment in Soda Company
Cost of Goods Sold
Depreciation Expense
Interest Expense
Dividends Declared
Accumulated Depreciation
Accounts Payable
Bonds Payable
Bond Premium
Common Stock
Pop Corporation
Debit
Credit
$ 20,400
170,000
85,000
Soda Company
Debit Credit
$ 26,600
40,000
45,000
390,000
265,000
113,920
191,000
84,800
25,000
20,000
21,000
7,200
35,000
20,000
$ 145,000
97,400
$ 90,000
40,000
260,400
100,000
125,000
Retained Earnings
132,900
Sales
265,000
2,600
71,000
65,000
140,000
Other Income
14,600
Income from Soda Company
11,020
$1,051,320 $1,051,320
$508,600 $508,600
Show Transcribed Text
On December 31, 20X2, Soda purchased inventory for $35,000 and sold it to Pop for $50,000. Pop resold $30,000 of the
inventory (i.e., $30,000 of the $50,000 acquired from Soda) during 20X3 and had the remaining balance in inventory at
December 31, 20X3.
During 20X3, Soda sold inventory purchased for $56,000 to Pop for $80,000, and Pop resold all but $23,000 of its
purchase. On March 10, 20X3, Pop sold inventory purchased for $15,000 to Soda for $30,000. Soda sold all but $7,500 of
the inventory prior to December 31, 20X3. Assume Pop uses the fully adjusted equity method, that both companies use
straight-line depreciation, and that no property, plant, and equipment has been purchased since the acquisition.
Required:
a. Prepare all consolidation entries needed to prepare a full set of consolidated financial statements at December 31,
20X3, for Pop and Soda. (If no entry is required for a transaction/event, select "No journal entry required" in the first
account field.)
b. Prepare a three-part consolidation worksheet for 20X3. (Values in the first two columns (the "parent" and "subsidiary"
balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries"
columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all
debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit
entries into one amount and enter this amount in the credit column of the worksheet.)
Transcribed Image Text:Pop Corporation acquired 70 percent of Soda Company's voting common shares on January 1, 20X2, for $109,200. At that date, the noncontrolling interest had a fair value of $46,800 and Soda reported $71,000 of common stock outstanding and retained earnings of $30,000. The differential is assigned to buildings and equipment, which had a fair value $20,000 higher than book value and a remaining 10-year life, and to patents, which had a fair value $35,000 higher than book value and a remaining life of five years at the date of the business combination. Trial balances for the companies as of December 31, 20X3, are as follows: ง c Item Cash & Accounts Receivable Inventory Land Buildings & Equipment Investment in Soda Company Cost of Goods Sold Depreciation Expense Interest Expense Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Bond Premium Common Stock Pop Corporation Debit Credit $ 20,400 170,000 85,000 Soda Company Debit Credit $ 26,600 40,000 45,000 390,000 265,000 113,920 191,000 84,800 25,000 20,000 21,000 7,200 35,000 20,000 $ 145,000 97,400 $ 90,000 40,000 260,400 100,000 125,000 Retained Earnings 132,900 Sales 265,000 2,600 71,000 65,000 140,000 Other Income 14,600 Income from Soda Company 11,020 $1,051,320 $1,051,320 $508,600 $508,600 Show Transcribed Text On December 31, 20X2, Soda purchased inventory for $35,000 and sold it to Pop for $50,000. Pop resold $30,000 of the inventory (i.e., $30,000 of the $50,000 acquired from Soda) during 20X3 and had the remaining balance in inventory at December 31, 20X3. During 20X3, Soda sold inventory purchased for $56,000 to Pop for $80,000, and Pop resold all but $23,000 of its purchase. On March 10, 20X3, Pop sold inventory purchased for $15,000 to Soda for $30,000. Soda sold all but $7,500 of the inventory prior to December 31, 20X3. Assume Pop uses the fully adjusted equity method, that both companies use straight-line depreciation, and that no property, plant, and equipment has been purchased since the acquisition. Required: a. Prepare all consolidation entries needed to prepare a full set of consolidated financial statements at December 31, 20X3, for Pop and Soda. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) b. Prepare a three-part consolidation worksheet for 20X3. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)
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