Equity method: The equity method basically keeps the record of the parent’s ownership interest that is multiplied by the reported net income of the subsidiary. This income will be added to parent’s investment account and the deduction in this method will be of the parent’s ownership interest multiplied by the reported losses of the subsidiary and parent’s ownership interest multiplied by the declared dividends of the subsidiary. All together equals the equity-adjusted balance.
Cost method: The cost method basically retains the original cost of acquisition balance in the subsidiary account. As the income is earned by the subsidiary, no adjustments would be made.
To calculate: The preparation of consolidated income statement for Neiman and its subsidiary with supporting of income distribution schedule.
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Advanced Accounting
- Venus Company purchases 8,000 shares of Sundown Company for $64 per share. Just prior to the purchase, Sundown Company has the following balance sheet: (see attachment)Venus Company believes that the inventory has a fair value of $400,000 and that the property plant, and equipment is worth $500,000. 1. Prepare the value analysis schedule and the determination and distribution of excess schedule. 2. Prepare the elimination entries that would be made on a consolidated worksheet prepared on the date of acquisition.arrow_forwardOn January 2, 20Y7, Mikedes Company acquired 30% of the outstanding stock of Violet Company for $720,000. For the year ended December 31, 20Y7, Violet Company earned income of $190,000 and paid dividends of $40,000. On January 31, 20Y8, Mikedes Company sold all of its investment in Violet Company stock for $770,000. Required: Journalize the entries for Mikedes Company for the purchase of the stock, the share of Violet income, the dividends received from Violet Company, and the sale of the Violet Company stock. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.arrow_forwardParker Company acquires an 80% interest in Sargent Company for $300,000 on January 1, 2015, when Sargent Company has the following balance sheet: (See image) The excess of the price paid over book value is attributable to the fixed assets, which have afair value of $250,000, and to goodwill. The fixed assets have a 10-year remaining life. Parkeruses the sophisticated equity method to record the investment in Sargent Company. The trial balances of Parker and Sargent companies for December 31, 2016, are presented as follows: (see image) Parker Company continues to use the sophisticated equity method. Required:1. Prepare all the eliminations and adjustments that would be made on the 2016 consolidatedworksheet.arrow_forward
- Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2017. As of that date, Abernethy has the following trial balance: Debit Credit Accounts payable $ 55,100 Accounts receivable $ 44,700 Additional paid-in capital 50,000 Buildings (net) (4-year remaining life) 163,000 Cash and short-term investments 83,750 Common stock 250,000 Equipment (net) (5-year remaining life) 207,500 Inventory 122,000 Land 85,500 Long-term liabilities (mature 12/31/20) 162,500 Retained earnings, 1/1/17 202,150 Supplies 13,300 Totals $ 719,750 $ 719,750 During 2017, Abernethy reported net income of $105,000 while declaring and paying dividends of $13,000. During 2018, Abernethy reported net income of $136,750 while declaring and paying dividends of $36,000. Assume that Chapman Company acquired Abernethy’s common stock for $605,600 in cash. As of…arrow_forwardCardinal Company acquires an 80% interest in Huron Company common stock for $420,000 cash on January 1, 2015. At that time, Huron Company has the following balance sheet: (attached)Prepare a determination and distribution of excess schedule for the investment in Huron Company (a value analysis is not needed). Prepare journal entries that Cardinal Company would make on its books to record income earned and/or dividends received on its investment in Huron Company during 2015 and 2016 under the following methods: simple equity, sophisticated equity, and cost.arrow_forwardLemon Ltd has a December 31 year end. On January 1, 2018 Lemon acquires 4000 shares of Nike Inc at a cost of $150 per share. Transaction cost is $1200. The Investment is classified as available for Sale. On December 31, 2018 the Fair Value of Nike share has decreased to $120/share. On March 1, 2019 Lemon Ltd sells the shares for $135 per share. Transaction cost for the sale is $2000. Record the journal entries in the books of Lemon Ltd.arrow_forward
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- On March 1, 2015, Penson Enterprises purchases an 80% interest in Express Corporation for $320,000 cash. Express Corporation has the following balance sheet on February 28, 2015: (attached)Penson Enterprises receives an independent appraisal on the fair values of Express Corporation’s assets and liabilities. The controller has reviewed the following figures and accepts them as reasonable:Accounts receivable . . . . . . . . . . $ 60,000Inventory . . . . . . . . . . . . . . . . . . . 100,000Land. . . . . . . . . . . . . . . . . . . . . . . 50,000Buildings . . . . . . . . . . . . . . . . . . . 200,000Equipment . . . . . . . . . . . . . . . . . . 162,000Current liabilities . . . . . . . . . . . . . 50,000Bonds payable . . . . . . . . . . . . . . 95,0001. Record the investment in Express Corporation.2. Prepare the value analysis schedule and the determination and distribution of excess schedule.3. Prepare the elimination entries that would be made on a consolidated worksheet prepared on the…arrow_forwardOn April 1, 2024, Sandhill Company purchased 46,400 common shares in Ecotown Ltd. for $13 per share. Management has designated the investment as FVTOCI. On December 5, Ecotown paid dividends of $0.10 per share and its shares were trading at $15 per share on December 31. Prepare the required entries to record the purchase, dividends, and year-end adjusting journal entry (if any) for this investment. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Record journal entries in the order presented in the problem. List all debit entries before credit entries.) Date Save for Later Account Titles Debit Credit Attempts: 0 of 1 used Submit Answerarrow_forwardOn 1/5/2015 , K-mart. Co acquired 90% shares of the outstanding common shares of Tesco. for $360000 cash. At this date the common stock of Tesco was $ 300000 and retained earnings of $ 90000 and treasury stock of 30000. The income of Tesco before acquisition was 30000. If the company uses full year method, the differences between implied and book value is: Select one: a. 30000 b. 20000 c. 10000 d. None of the given choicearrow_forward
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