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Q1) Crane Mechanics obtained 75 percent of Downey Enterprises on March 31, 2005, for $3,645,000.

Downey's book value at that date totalled= $4,000,000. Appraisal values were larger than book values for identifiable assets in given amounts: Inventory ($300,000) and Plant and Equipment ($700,000). Purchase differential for Inventory is to be amortized over 5 months and Plant and Equipment over ten years. For remainder of 2005 Downey reports $635,000 of income and pays $100,000 in dividends. Following balances exist for Crane at December 31, 2005, and Downey at March 31 and December 31, 2005.

Cash

$730,000

$175,000

$180,000

Inventory

1,950,000

260,000

340,000

Plant and Equipment

17,650,000

5,150,000

5,765,000

Accumulated Depreciation

(4,655,000)

(935,000)

(1,250,000)

Investment in Downey

3,886,875

 

 

Expenses

6,400,000

1,000,000

4,265,000

Dividends

1,275,000

150,000

250,000

Total Debits

$27,236,875

$5,800,000

$9,550,000

Liabilities

$3,550,000

$650,000

$500,000

Common Stock

350,000

100,000

100,000

Additional Paid-In Capital

2,650,000

850,000

850,000

Retained Earnings

9,720,000

2,800,000

2,800,000

Sales

10,650,000

1,400,000

5,300,000

Extraordinary Gain From Acquisition of Downey

105,000

 

 

Investment Income 211,875 Total Credits

$27,236,875

$5,800,000

$9,550,000

Make all worksheet eliminations in journal entry form essential to consolidate Crain and Downey at December 31, 2005.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M916793

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