PROBLEM 1-
I. Prepare the Value Analysis Schedule as of the DATE OF ACQUISITION, 1/1/X5.
II. Prepare the Determination and Distribution Schedule as of the DATE OF ACQUISITION, 1/1/X5.
III. Prepare the eliminating and adjusting entries FOR THE YEAR ENDED December 31, 20X7 in general journal form:
1. Prepare the (CY1) journal entry to eliminate Subsidiary Income.
2. Prepare the (CY2) journal entry to eliminate dividends paid by subsidiary to parent.
3. Prepare the (EL) journal entry to eliminate proportionate Subsidiary stockholders' equity balances.
4. Prepare the (D) journal entry to distribute the excess cost over book value from the 20X5 D&D Schedule.
5. Prepare the (A) journal entry(s) to amortize the excess from the 20X5 D&D Schedule for the current year and prior year(s).
6. Prepare the (IS) journal entry to eliminate intercompany sales.
7. a) Prepare the (BI) journal entry to eliminate beginning inventory profit (BI).
7. b) Prepare the (EI) journal entry to eliminate ending inventor profit.
8. Prepare the (IA) journal entry to eliminate intercompany accounts receivable and payable.
9. Prepare the (LA) journal entry to eliminate the gain on the sale of the land.
PROBLEM 2 -
On January 1, 20X1, Parent Company acquired 80% of the common stock of Subsidiary Company for $500,000. On this date, Subsidiary Co. had total owners' equity of $400,000. Any excess of cost over book value is attributable to a patent, which is to be amortized over 20 years. There is no goodwill.
During 20X1 and 20X2, Parent has appropriately accounted for its Investment in Subsidiary using the simple equity method.
On January 1, 20X2, Subsidiary Co. held $30,000 of merchandise acquired from Parent Co. During 20X2, Parent Co. sold merchandise to Subsidiary Co. for $100,000, of which $20,000 is held by Subsidiary on December 31, 20X2. Parent's gross profit on all sales is 25%.
On December 31, 20X2, Subsidiary still owes Parent Co. $12,000 for merchandise acquired during 20X2.
On Jan. 1, 20X2, Subsidiary Co. sold a machine to Parent Co. for $75,000. Subsidiary Co. purchased the machine for $90,000 three years earlier and accumulated depreciation to date is $27,000. Parent Co. is using the machinery in their business and is depreciating it over a 4-year useful life, assuming no residual value and using the straight-line method.
Subsidiary Company's Internally Generated Net Income for 20X2 is $80,000.
Parent Company's Internally Generated Net Income for 20X2 is $160,000.
Consolidated Net Income for 20X2 is $222,250.
REQUIRED:
I. Prepare the D&D Schedule as of 1/1/X1 for Parent Co.
II. Prepare the Income Distribution Schedules for the year ended 12/31/X2 for Parent Co. and Subsidiary Co..
PROBLEM 3 -
Using the information from Problem 1, determine how much Net Income was recorded by Subsidiary Co. in 20X5, assuming:
1. no dividends were declared by Subsidiary Co. in 20X5, and
2. Subsidiary Co.'s 20X6 Net Income = $42,000 and dividends declared in 20X6 = $10,000.
(Hint: Recall, Parent Co. uses the simple equity method to account for its Investment in Subsidiary Co. Stock.)
PROBLEM 4 -
On January 1, 20X5, Parent Company acquired 80% of the common stock of Subsidiary Company for $440,000. On this date, Subsidiary Co. had the following Balance Sheet:
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Subsidiary Company Balance Sheet January 1, 20X5
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Assets
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Liabilities & Equity
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Accounts Receivable
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$82,000
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Accounts Payable
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$90,000
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Inventory
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40,000
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Bonds Payable
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100,000
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Land
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60,000
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Buildings
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200,000
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Common Stock, par $1
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$10,000
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Acc Depr - bldgs
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(50,000)
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Paid-in Capital in Excess of Par
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90,000
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Equipment
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100,000
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Retained Earnings
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112,000
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Acc Depr - equip
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(30,000)
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Total Assets
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$402,000
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Total Liabilities & Equity
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$402,000
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Book values and fair values of the identifiable net assets are the same except for the following fair values:
- Land - $150,000
- Buildings - 280,000
- Equipment - 100,000
Buildings have a remaining useful life of 20 years and Equipment has a remaining useful like of 5 years. Neither has any residual value and both are being depreciated using the straight-line method. Any remaining excess is attributable to goodwill.
Parent has appropriately accounted for its Investment in Subsidiary using the simple equity method.
On January 1, 20X7, Parent held merchandise acquired from Subsidiary for $10,000. During 20X7, Subsidiary sold merchandise to Parent for $100,000, of which $20,000 is held by Parent on December 31, 20X7. Subsidiary's usual gross profit on affiliated sales is 30%.
On December 31, 20X7, Parent still owes Subsidiary $20,000 for merchandise acquired during 20X7.
On April 28, 20X7, Parent sold to Subsidiary a parcel of land with a cost of $45,000. The sales price was $60,000. A worksheet for Parent Co. and Subsidiary Co. as of 12/31/X7 is on the following page (Page 1.5). You do not need to complete the worksheet.
Attachment:- Assignment File.rar