Equity Method: Equity method is the process of treating investment in associate company. Equity method is applied when an investor entity hold 20-50% of voting stock of the associate company. To prepare : Trial balance for D’s company and prepare all the elimination & adjusting entries necessary to prepare consolidated financial statement.

Question

Want to see the full answer?

Answer 1

Question

Chapter 11, Problem 11.7P

To determine

Equity Method:

Equity method is the process of treating investment in associate company. Equity method is applied when an investor entity hold 20-50% of voting stock of the associate company.

To prepare: Trial balance for D’s company and prepare all the elimination & adjusting entries necessary to prepare consolidated financial statement.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Campione Manufacturing acquired an 80% interest in DaLuca Distributors, a foreign corporation established on November 1, 2010, for 650,000 foreign currency units (FC). Campione acquired its 80% interest on June 30, 2012, when DaLuca’s shareholders’ equity consisted of capital stock, paid-in capital in excess of par, and retained earnings in the amounts of 100,000 FC, 210,000 FC, and 300,000 FC, respectively. The excess of cost over book value was allocated to goodwill and depreciable assets in the amounts of 120,000 FC and 42,000 FC, respectively. The goodwill is annually tested for impairment, and no impairment in the value has been suggested. The depreciable assets are to be depreciated over 10 years assuming the straight-line method. DaLuca’s income and dividends over the period from July 1, 2012, through the end of 2014 were as follows: FC Net Income FC DividendsLast half of 2012 . . . . . . . . . . . . . . . . . . .75,000…

Dorsey Corporation purchased 90% of the common stock of Lansing Company on January 1, 2008. The cost of the investment was equal to the book value interest acquired. Lansing Company operates two retail stores and an exporting business in London that specializes in buying and selling British tweeds. The subsidiary provided the following financial statements in pounds to the parent company: LANSING COMPANYConsolidated Income and Retained Earnings Statementfor the Year Ended December 31, 2014 Sales 2,820,000 Cost of Goods Sold (1,280,000 ) Depreciation Expense (280,000 ) Other Expenses (414,000 ) Net Income 846,000 1/1 Retained Earnings 853,000 1,699,000 Less: Dividends Declared and Paid, December 31 (322,000 ) 12/31 Retained Earnings 1,377,000 LANSING COMPANYBalance SheetDecember 31, 2014 Cash and Receivables 1,140,000 Inventory 529,000 Property, Plant, and Equipment 3,680,000 Total 5,349,000 Current…

On January 1, 2016, Telconnect acquires 70 percent of Bandmor for $490,000 cash. The remaining 30 percent of Bandmor’s shares continued to trade at a total value of $210,000. The new subsidiary reported common stock of $300,000 on that date, with retained earnings of $180,000. A patent was undervalued in the company’s financial records by $30,000. This patent had a five-year remaining life. Goodwill of $190,000 was recognized and allocated proportionately to the controlling and noncontrolling interests. Bandmor earns net income and declares cash dividends as follows:On December 31, 2018, Telconnect owes $22,000 to Bandmor.a. If Telconnect has applied the equity method, what consolidation entries are needed as of December 31, 2018?b. If Telconnect has applied the initial value method, what Entry *C is needed for a 2018 consolidation?c. If Telconnect has applied the partial equity method, what Entry *C is needed for a 2018 consolidation?d. What noncontrolling interest balances will…