Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Question
Chapter 5, Problem 5.3P
To determine
Concept Introduction:
Intercompany adjustments in consolidation- Inter-company receivables and payables are eliminated, and subsidiary’s capital is also eliminated.
To prepare The necessary worksheet for consolidation of given accounts
Expert Solution & Answer
Answer to Problem 5.3P
| Eliminations & Adjustments | NCI | Controlled | Consolidated | ||||
| G | A | Dr. | Cr | ||||
| Cash | 404,486 | 72,625 | 477,111 | ||||
| 752,500 | 105,000 | 857,500 | |||||
| Interest Receivable | 9,625 | (9,625) | - | ||||
| Inventory | 1,950,000 | 900,000 | 2,850,000 | ||||
| Investment in Appliance outlets | 1,700,000 | (1,700,000) | - | ||||
| Investment in 11% bonds | 254,000 | (254,000) | - | ||||
| Investment in Mortgage | 175,000 | (175,000) | - | ||||
| Property,plant and Equipment | 9,000,000 | 2,950,000 | 167,500 | (195,000) | 11,922,500 | ||
| (1,695,000) | (940,000) | (2,635,000) | |||||
| Accounts Payable | (670,000) | (80,000) | (750,000) | ||||
| Interest Payable | (18,333) | (9,625) | 9,625 | (18,333) | |||
| Bonds Payable(11%) | (2,000,000) | (500,000) | 250,000 | (2,250,000) | |||
| Discount on bonds payable | 10,470 | 12,000 | (6,000) | 16,470 | |||
| Mortgage Payable | (175,000) | 175,000 | - | ||||
| Common stock($5 par) | (3,200,000) | (3,200,000) | |||||
| Common stock($10 par) | (800,000) | 800,000 | - | ||||
| Other paid-In capital in excess of par | (4,550,000) | (625,000) | 625,000 | (4,550,000) | |||
| Retained Earnings, January 1,2016 | (1,011,123) | (770,000) | 770,000 | (256,000) | (1,267,123) | ||
| Sales | (9,800,000) | (3,000,000) | (12,800,000) | ||||
| Gain on sale of Building | (27,500) | 27,500 | - | ||||
| Interest income | (36,125) | 27,500 | (8,625) | ||||
| Dividend Income | (48,000) | 48,000 | - | ||||
| Cost of goods sold | 4,940,000 | 1,700,000 | 6,640,000 | ||||
| Depreciation expense | 717,000 | 95,950 | 812,950 | ||||
| Interest expense | 223,000 | 67,544 | (27,500) | 263,044 | |||
| Other expenses | 2,600,000 | 936,506 | 3,536,506 | ||||
| Dividends declared | 320,000 | 60,000 | (60,000) | 320,000 | |||
| Loss on settlement of bonds | 10,000 | 10,000 | |||||
| 200,000 | 200,000 | ||||||
| NCI | (427,000) | (427,000) | |||||
| Totals | - | 0 | 3,090,875 | -3,090,875 | 0 | 0 | 0 |
| 0 | |||||||
Explanation of Solution
| Computation of Goodwill | |
| $ | |
| Common stock($10 par) | 800,000 |
| Other paid in capital in excess of par | 625,000 |
| Retained earnings | 450,000 |
| Total value of Appliance Outlets | 1,875,000 |
| General Appliance's stake @80% | 1,500,000 |
| Consideration paid | 1,700,000 |
| Goodwill (Consideration Paid-Value of stake acquired) | 200,000 |
| Computation of Goodwill |
| Schedule of bonds discount amortization | ||
| Date | Particulars | $ |
| 31.12.12 | Discount on bond issued | 24000 |
| 31.12.13 | Less. Discount amortization | -3000 |
| 31.12.13 | Closing balance | 21000 |
| 31.12.14 | Less. Discount amortization | -3000 |
| 31.12.14 | Closing balance | 18000 |
| 31.12.15 | Less. Discount amortization | -3000 |
| 31.12.15 | Closing balance | 15000 |
| 31.12.16 | Less. Discount amortization | -3000 |
| 31.12.16 | Closing balance | 12000 |
| Investment in 11% bonds | 254000 |
| Less. Nominal | -250,000 |
| Add. Discount on bonds (50%) | -6000 |
| Loss on retirement of bond | 10,000 |
| Minority Interest | |
| Common stock($10 par) | 800,000 |
| Other paid-In capital in excess of par | 625,000 |
| Retained Earnings,January 1,2016 | 770,000 |
| 20% Minority Interest | 439,000 |
| Less: Dividend | -12000 |
| Minority Interest | 427,000 |
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The contributed surplus arose from net excess of proceeds over cost on a previous cancellation of common shares. Total assets at December 31, 2022, were $2,140,000, and total assets at December 31, 2023, were $2,616,000. The company follows IFRS.
(a)
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Instructions
Prepare the necessary journal entries for Raja Corporation to record the above transactions. Raja Corporation uses the cost method of accounting for treasury stock.
Account
Debit
Credit
(a)
(b)
(c)
Chapter 5 Solutions
Advanced Accounting
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