Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 3, Problem 3.7.1P
To determine
Introduction:
Consolidation of statements:
Consolidation of statements basically refers to the various financial statements like
To calculate : The value analysis and determination and distribution of excess schedule for the investment.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Duckworth Corporation purchases an 80% interest in Panda Corporation on January 1, 2017, in exchange for 5,000 Duckworth shares (market value of $18) plus $155,000 cash. The fair value of the NCI is proportionate to the price paid by Duckworth for its interest. The appraisal shows that some of Panda’s equipment, with a 4-year estimated remaining life, is undervalued by $20,000. The excess is attributed to goodwill. Panda Corporation’s balance sheet on December 31, 2016 is attached.The following information relates to the activities of the two companies for 2017:a. Panda pays off $10,000 of its long-term debt.b. Duckworth purchases production equipment for $76,000.c. Consolidated net income is $103,200; the NCI’s share is $5,000. Depreciation expense taken by Duckworth and Panda on their separate books is $92,000 and $28,000, respectively.d. Duckworth pays $30,000 in dividends; Panda pays $15,000.Prepare the consolidated statement of cash flows for the year ended December 31, 2017, for…
Parker Company acquires an 80% interest in Sargent Company for $300,000 in cash on January 1, 2015, when Sargent Company has the following balance sheet: (attached)The excess of the price paid over book value is attributable to the fixed assets, which have a fair value of $250,000, and to goodwill. The fixed assets have a 10-year remaining life. Parker Company uses the simple equity method to record its investment in Sargent Company. The following trial balances of the two companies are prepared on December 31, 2015: Parker Sargent Current Assets . . . . . . . . . . . . . . . . . . . . . . . . 10,000 130,000 Depreciable Fixed A . . . . . . . . . . . . . . . . . . 400,000 200,000 Accumulated Depreciation . . . .. . . . . . . (106,000) (20,000) Investment in Sargent . .. .. . . . . . . . . . . . . 316,000 Current Liabilities. . . . . . . . . . . . . . . . . . . . . (60,000)…
P Company owns 60% of the outstanding common stock of S Company. On January 1, 2016, P Company sold equipment to S Company for $300,000. The equipment cost P Company $1,000,000 on January 1st, 2010. The useful life at the time of sale was determined to be 10 years. After the sale from P to S, the management of S Company estimated that the equipment had a remaining useful life of 8 years.
To solve: Prepare all journal entries for P and S (from initial purchase of equipment from 3rd parties, depreciation from initial purchase to sale between the related parties) on January 1, 2016 . In addition, prepare the w/p entry to eliminate the intercompany sale of equipment as of January 1, 2016. Finally, prepare the adjustment to depreciation on Dec. 31, 2016.
Chapter 3 Solutions
Advanced Accounting
Ch. 3 - Prob. 1UTICh. 3 - Prob. 2UTICh. 3 - Prob. 3UTICh. 3 - Prob. 4UTICh. 3 - Prob. 5UTICh. 3 - Prob. 6UTICh. 3 - Prob. 7UTICh. 3 - Prob. 1ECh. 3 - Prob. 2ECh. 3 - Prob. 3.1E
Ch. 3 - Prob. 3.2ECh. 3 - Prob. 3.3ECh. 3 - Prob. 3.4ECh. 3 - Prob. 3.5ECh. 3 - Equity method, second year, eliminations, income...Ch. 3 - Prob. 4.2ECh. 3 - Prob. 5.1ECh. 3 - Prob. 5.2ECh. 3 - Prob. 5.3ECh. 3 - Prob. 5.4ECh. 3 - Prob. 5.5ECh. 3 - Prob. 6.1ECh. 3 - Prob. 6.2ECh. 3 - Prob. 7.1ECh. 3 - Prob. 7.2ECh. 3 - Prob. 7.3ECh. 3 - Prob. 7.4ECh. 3 - Prob. 7.5ECh. 3 - Prob. 8.1ECh. 3 - Prob. 8.2ECh. 3 - Prob. 9ECh. 3 - Prob. 10.1ECh. 3 - Prob. 10.2ECh. 3 - Prob. 10.3ECh. 3 - Prob. 11ECh. 3 - Prob. 3B.1.1AECh. 3 - Prob. 3B.1.2AECh. 3 - Prob. 3B.1.3AECh. 3 - Prob. 3B.2.1AECh. 3 - Prob. 3B.2.2AECh. 3 - Prob. 3B.3AECh. 3 - Prob. 3.1.1PCh. 3 - Prob. 3.1.2PCh. 3 - Prob. 3.1.3PCh. 3 - Prob. 3.2.1PCh. 3 - Prob. 3.2.2PCh. 3 - Prob. 3.3.1PCh. 3 - Prob. 3.3.2PCh. 3 - Prob. 3.3.3PCh. 3 - Prob. 3.3.4PCh. 3 - Prob. 3.4.1PCh. 3 - Prob. 3.4.2PCh. 3 - Prob. 3.5.1PCh. 3 - Prob. 3.5.2PCh. 3 - Prob. 3.5.3PCh. 3 - Prob. 3.6.1PCh. 3 - Prob. 3.6.2PCh. 3 - Prob. 3.6.3PCh. 3 - Prob. 3.7.1PCh. 3 - Prob. 3.7.2PCh. 3 - Prob. 3.7.3PCh. 3 - Prob. 3.8.1PCh. 3 - Prob. 3.8.2PCh. 3 - Prob. 3.9.1PCh. 3 - Prob. 3.9.2PCh. 3 - Prob. 3.10.1PCh. 3 - Prob. 3.10.2PCh. 3 - Prob. 3.11.1PCh. 3 - Prob. 3.11.2PCh. 3 - Prob. 3.12.1PCh. 3 - Prob. 3.12.2PCh. 3 - Prob. 3.13.1PCh. 3 - Prob. 3.13.2PCh. 3 - Prob. 3.15.1PCh. 3 - Prob. 3.15.2PCh. 3 - Prob. 3.16.1PCh. 3 - Prob. 3.16.2PCh. 3 - Prob. 3.17.1PCh. 3 - Prob. 3.17.2PCh. 3 - Prob. 3.18.1PCh. 3 - Prob. 3.18.2PCh. 3 - Prob. 3A.1.1APCh. 3 - Prob. 3A.1.2APCh. 3 - Prob. 3A.2APCh. 3 - Prob. 3A.3APCh. 3 - Prob. 3B.1APCh. 3 - Prob. 3B.2APCh. 3 - Prob. 3B.3.1APCh. 3 - The trial balances of Campton Corporation and Dorn...Ch. 3 - The trial balances of Campton Corporation and Dorn...
Knowledge Booster
Similar questions
- On May 1, 2015, Zoe Inc. purchased Branta Corp. for $15,000,000 in cash. They only received $12,000,000 in net assets. In 2016, the market value of the goodwill obtained from Branta Corp. was valued at $4,000,000, but in 2017 it dropped to $2,000,000. Prepare the journal entry for the creation of goodwill and the entry to record any impairments to it in subsequent years.arrow_forwardThomson Corporation owns 70 percent of the outstanding stock of Stayer, Incorporated. On January 1, 2016, Thomson acquired a building with a 10-year life for $460,000. Thomson depreciated the building on the straight-line basis assuming no salvage value. On January 1, 2018, Thomson sold this building to Stayer for $430,400. At that time, the building had a remaining life of eight years but still no expected salvage value. In preparing financial statements for 2018, how does this transfer affect the computation of consolidated net income?a. Net income is reduced by $62,400.b. Net income is reduced by $59,440.c. Net income is reduced by $70,200.d. Net income is reduced by $54,600.arrow_forwardMast Corporation acquires a 75% interest in the common stock of Shaw Company on January 1, 2014, for $462,500 cash. Shaw has the following balance sheet on that date:Appraisals indicate that the book values for inventory, buildings and equipment, and patent are below fair values. The inventory has a fair value of $50,000 and is sold during 2014. The buildings and equipment have an appraised fair value of $300,000 and a remaining life of 20 years. The patent, which has a 10-year life, has an estimated fair value of $50,000. Any remaining excess is goodwill. Shaw Company reports the following income earned and dividends paid during 2014 and 2015: Retained earnings, January 1, 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . $200,000 Net income, 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 70,000 Dividends paid in 2014. . . . . . . . . . . . . . . . . . . . . . . . (20,000) 50,000 Balance, December 31, 2014 . . . . . . . . . . . . . . . . . .…arrow_forward
- Perke Corporation purchased 80% of the stock of Superstition Company for $1,970,000 on January 1, 2012. On this date, the fair value of the assets and liabilities of Superstition Company was equal to their book value except for the inventory and equipment accounts. The inventory had a fair value of $725,000 and a book value of $600,000. Sixty percent of Superstition Company's inventory was sold in 2012; the remainder was sold in 2013. The equipment had a book value of $900,000 and a fair value of $1,075,000. The remaining useful life of the equipment is seven years. The balances in Superstition Company's capital stock and retained earnings accounts on the date of acquisition were $1,200,000 and $600,000, respectively. Perke uses the complete equity method to account for its investment in Superstition. The following financial data are from Superstition Company's records. Net income: (2012) $750,000; (2013) $900,000 Dividends declared: (2012) $150,000; (2013) $225,000 Required: c.…arrow_forwardOn January 1, 2017, Lund Corporation purchases a 30% interest in Aluma-Boat Company for $200,000. At the time of the purchase, Aluma-Boat has total stockholders’ equity of $400,000. Any excess of cost over the equity purchased is attributed in part to machinery worth $50,000 more than book value with a remaining useful life of five years. Any remaining excess would be allocated to goodwill. Aluma-Boat reports the following income and dividend distributions in 2017 and 2018: 2017 2018 Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $50,000 $45,000 Dividends declared and paid . . . . . . . . . . . . . 10,000 10,000 Lund sells its investment in Aluma-Boat Company on January 2, 2019, for $230,000. Record the sale of the investments assuming the use of the equity method. You may ignore income taxes. Carefully schedule the investment account balance at the time…arrow_forwardDunker Company purchases an 80% interest in the common stock of Fennig Company for $850,000 on January 1, 2017. The fair value of the NCI is $212,500. At the time of the purchase, the total stockholders’ equity of Fennig is $968,750. The price paid is $75,000 in excess of the book value of the controlling portion of Fennig equity. The excess is attributed to a patent with a 10-year life.During 2019, Dunker Company and Fennig Company report the following internally generated income before taxes: Dunker Company Fennig CompanySales . . . . . . . . . . . . . . . . . . . . . . . . . . $ 300,000 $120,000Cost of goods sold . . . . . . . . .. . . . . (200,000) (90,000)Gain on machine. . . . . . . . . . . . . . . . . . 5,000Expenses . . . . . . . . . . . . . . . . . . . . . . . . (40,000) (20,000)Income before taxes . . . . . .. . . . . . . $ 65,000 $ 10,000Fennig…arrow_forward
- On January 1, 2017, Pruit Company purchased 85% of the outstanding common stock of Salty Company for $525,000. On that date, Salty Company’s stockholders’ equity consisted of common stock, $150,000; other contributed capital, $60,000; and retained earnings, $210,000. Pruit Company paid more than the book value of net assets acquired because the recorded cost of Salty Company’s land was significantly less than its fair value. During 2017 Salty Company earned $222,000 and declared and paid a $75,000 dividend. Pruit Company used the partial equity method to record its investment in Salty Company. Required: Prepare the investment related entries on Pruit Company’s books for 2017. Prepare the workpaper eliminating entries for a workpaper on December 31, 2017.arrow_forwardRob Company purchases a 90% interest in Venus Company for $418,500 on January 1, 2017. Any excess of cost over book value is attributed to equipment, which is being depreciated over 20 years. Both companies end their reporting periods on December 31. Since the investment in Venus Company is consolidated, Rob Company chooses to use the cost method to maintain its investment. On December 31, 2020, Rob Company sells 8,000 shares of Venus Company for $700,000. The following stockholders’ equity balances of Venus Company are available: January 1, 2017 January 1, 2020Common stock ($10 par). . . .. . . . . . $100,000 $100,000Retained earnings . . . . . . . . . . . . . . . . 250,000 420,000Total equity . . . . . . . . . . . . . . . . . . . . . $350,000 $520,000Venus Company earns $70,000 during 2020. Prepare a determination and distribution of excess schedule. Record the…arrow_forwardProblems 7 and 8 relate to the following: On January 1, 2016, Pride Corporation purchased 90 percent of the outstanding voting shares of Star, Inc., for $540,000 cash. The acquisition-date fair value of the noncontrolling interest was $60,000. At January 1, 2016, Star’s net assets had a total carrying amount of $420,000. Equipment (eight-year remaining life) was undervalued on Star’s financial records by $80,000. Any remaining excess fair value over book value was attributed to a customer list developed by Star (four-year remaining life), but not recorded on its books. Star recorded net income of $70,000 in 2016 and $80,000 in 2017. Each year since the acquisition, Star has declared a $20,000 dividend. At January 1, 2018, Pride’s retained earnings show a $250,000 balance. Selected account balances for the two companies from their separate operations were as follows Assuming that Pride, in its internal records, accounts for its investment in Star using the equity method, what amount of…arrow_forward
- Parker 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_forwardHarper, Inc. acquires 40 percent of the outstanding voting stock of Kinman Company on January 1, 2017, for $210,000 in cash. The book value of Kinman’s net assets on that date was $400,000, although one of the company’s buildings, with a $60,000 carrying amount, was actually worth $100,000. This building had a 10-year remaining life. Kinman owned a royalty agreement with a 20-year remaining life that was undervalued by $85,000. Kinman sold inventory with an original cost of $60,000 to Harper during 2017 at a price of $90,000. Harper still held $15,000 (transfer price) of this amount in inventory as of December 31, 2017. These goods are to be sold to outside parties during 2018. Kinman reported a $40,000 net loss and a $20,000 other comprehensive loss for 2017. The company still manages to declare and pay a $10,000 cash dividend during the year. During 2018, Kinman reported a $40,000 net income and declared and paid a cash dividend of $12,000. It made additional inventory sales of…arrow_forwardPaar Corporation bought 100 percent of Kimmel, Inc., on January 1, 2015. On that date, Paar’s equipment (10-year life) has a book value of $417,500 but a fair value of $579,500. Kimmel has equipment (10-year life) with a book value of $274,000 but a fair value of $444,000. Paar uses the equity method to record its investment in Kimmel. On December 31, 2017, Paar has equipment with a book value of $292,250 but a fair value of $481,250. Kimmel has equipment with a book value of $191,800 but a fair value of $399,300. What is the consolidated balance for the Equipment account as of December 31, 2017?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning