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## Accounting

 Accounting Basics Cost Accounting Financial Accounting Managerial Accounting Auditing Taxation

Instructions:

• Read the background information and answer required problems a and b.

• Make sure you note what year is being requested.

• You might use written resources for this project like– the textbook.

Background Information:

On January 1, 20X1, Powers Company obtained 80% of the common stock of Sculley Company for \$195,000. On this date Sculley had total owners' equity of \$200,000 (common stock, other paid-in capital, and retained earnings of \$10,000, \$90,000, and \$100,000 respectively).

Any excess of cost over book value is attributable to inventory (worth \$6,250 more than cost), to equipment (worth \$12,500 more than book value), and to patents. FIFO is used for inventories. The equipment has a remaining life of five years and straight-line depreciation is used. The excess to the patents is to be amortized over 20 years.

On July 1, 20X2 Sculley borrowed \$100,000 from Powers with a 10% 1-year note; interest is due at maturity.

On January 1, 20X2, Powers held merchandise acquired from Sculley for \$10,000. During 20X2, Sculley sold merchandise to Powers for \$50,000, \$20,000 of that is still held by Powers on December 31, 20X2. Sculley's general gross profit on affiliated sales is 50%.

On December 31, 20X1, Powers sold equipment to Sculley at the gain of \$10,000. During 20X2, the equipment was used by Sculley. Depreciation is being find outd using the straight-line method, a five-year life, and no salvage value.

Both companies have a calendar-year fiscal year.

Suppose that during 20X1 and 20X2, Powers has suitably accounted for its investment in Sculley using the cost method.

Required:

a. Using the information above, prepare a determination and distribution of excess schedule.

b. Complete the income and distribution schedule.

c. Complete the worksheet for consolidated financial statements for the year ended December 31, 20X2.

Accounting Basics, Accounting

• Category:- Accounting Basics
• Reference No.:- M91729
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