Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
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Question
Chapter 3, Problem 3.31P
a.
To determine
Introduction:The consolidated balance sheet and the worksheets are the computed tools that are used to calculate the
To prepare: A
a.
Expert Solution
Explanation of Solution
| Particulars | Amount ($) | Amount ($) |
| Equity method entry on books | ||
| Investment in SCo. Dr. | ||
| Income from SCo. Cr. | ||
| (To record P co. share of the S co. income) | ||
| Cash Dr. | ||
| Investment in the SCo. Cr. | ||
| (To record PCo. share in S Co. dividend) |
b.
To determine
Introduction:The consolidated balance sheet and the worksheets are the computed tools that are used to calculate the retained earnings and the dividend produced by the subsidiaries towards its parent company.
To prepare:The consolidated worksheet for the final values
b.
Expert Solution
Explanation of Solution
| Book value calculation | |||||||
| NCI | + | P co. | = | Common stock | + | Retained earnings | |
| Book value | |||||||
| Net income | |||||||
| Dividend | |||||||
| Ending book value |
| Income statement | P co. | S co. | Eliminated Dr | Eliminated Cr. | Consolidated |
| Cash | |||||
| Accounts received | |||||
| Inventory | |||||
| Investment in SCo. | |||||
| Land | |||||
| Building and equipment | |||||
| Less accumulated depreciation | |||||
| Total assets | |||||
| Account payable | |||||
| Bonds | |||||
| Common stocks | |||||
| Retained earnings | |||||
| NCI in NA in SCo. | |||||
| Total liabilities |
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Instructions
At a total cost of $6,950,000, Herrera Corporation acquired 229,500 shares of Tran Corp. common stock
as a long-term investment. Herrera Corporation uses the equity method of accounting for this investment.
Tran Corp. has 850,000 shares of common stock outstanding, including the shares acquired by Herrera
Corporation.
Required:
A. Journalize the entries by Herrera Corporation on December 31 to record the following
information (refer to the Chart of Accounts for exact wording of account titles):
1. Tran Corp. reports net income of $974,000 for the current period.
2. A cash dividend of $0.28 per common share is paid by Tran Corp. during the current
period.
B. Why is the equity method appropriate for the Tran Corp. investment?
Armadillo Enterprises acquired the following equity investmentsat the beginning of year 1 as trading investments.
Description
Number of shares
Market price per share
Total price
Finestra Company
15,000
x $25
$387,500
BVD Company
20,000
X$18
$360,000
Market values at theend of Years 1 &2 are presented
below:
Market/Fair Value
End of year 1
End of year 2
Finestra Company
$19
$23
BVD Company
|$22
$28
REQUIREMENTS:
Prepare the journal entry to record the acquisition of
theinvestments.
Prepare the adjusting journal entry required at the end of year1.
Armadillo Enterprises sells 15,000 shares of BVD Company for $16at the beginning of year 2. Prepare the journal entry to record thesale.
Prepare the adjusting journal entry required at the end of year2.
Assume that ArmadilloEnterprises now holds these investments asavailable-for-sale.
Prepare the journal entry to record the acquisition of theinvestments.
Prepare the adjusting journal entry required at the end of year1.
Armadillo Enterprises…
Peanut Company acquired 90 percent of Snoopy Company's outstanding common stock for $321,300 on January 1, 20X8, when the
book value of Snoopy's net assets was equal to $357,000. Peanut uses the equity method to account for investments. Trial balance
data for Peanut and Snoopy as of January 1, 20X8, follow:
Assets
Cash
Accounts Receivable
Inventory
Investment in Snoopy Company
Land
Buildings and Equipment
Accumulated Depreciation
Total Assets
Liabilities and Stockholders' Equity
Accounts Payable
Bonds Payable
Common Stock
Retained Earnings
Total Liabilities and Equity
Peanut Company Snoopy Company
$ 24,000
34,000
72,000
$ 71,000
66,000
117,000
321,300
231,000
719,000
(392,000)
$ 1,133,300
$ 66,000
195,000
481,000
391,300
$ 1,133,300
113,000
210,000
(8,000)
$ 445,000
$ 22,000
66,000
195,000
162,000
$ 445,000
Required:
a. Prepare the journal entry on Peanut's books for the acquisition of Snoopy on January 1, 20X8.
b. Prepare a consolidation worksheet on the acquisition date, January 1,…
Chapter 3 Solutions
Advanced Financial Accounting
Ch. 3 - What is the basic idea underlying the preparation...Ch. 3 - How might consolidated statements help an investor...Ch. 3 - Prob. 3.3QCh. 3 - Prob. 3.4QCh. 3 - Prob. 3.5QCh. 3 - Prob. 3.6QCh. 3 - Prob. 3.7QCh. 3 - Prob. 3.8QCh. 3 - Prob. 3.9QCh. 3 - Prob. 3.10Q
Ch. 3 - Prob. 3.11QCh. 3 - Prob. 3.12QCh. 3 - What is meant by indirect control? Give an...Ch. 3 - Prob. 3.14QCh. 3 - Prob. 3.15QCh. 3 - Prob. 3.16QCh. 3 - Prob. 3.17QCh. 3 - Prob. 3.18QCh. 3 - Prob. 3.1CCh. 3 - Prob. 3.2CCh. 3 - Prob. 3.1.1ECh. 3 - Prob. 3.1.2ECh. 3 - Prob. 3.1.3ECh. 3 - Prob. 3.1.4ECh. 3 - Multiple-Choice Question on Variable Interest...Ch. 3 - Multiple-Choice Question on Variable Interest...Ch. 3 - Prob. 3.2.3ECh. 3 - Prob. 3.2.4ECh. 3 - Prob. 3.3.1ECh. 3 - Prob. 3.3.2ECh. 3 - Prob. 3.3.3ECh. 3 - Prob. 3.4.1ECh. 3 - Prob. 3.4.2ECh. 3 - Prob. 3.4.3ECh. 3 - Prob. 3.4.4ECh. 3 - Balance Sheet Consolidation On January 1, 20X3,...Ch. 3 - Prob. 3.6ECh. 3 - Prob. 3.7ECh. 3 - Prob. 3.8ECh. 3 - Prob. 3.9ECh. 3 - Reporting for a Variable Interest Entity Gamble...Ch. 3 - Prob. 3.11ECh. 3 - Prob. 3.12ECh. 3 - Prob. 3.13ECh. 3 - Prob. 3.14ECh. 3 - Prob. 3.15ECh. 3 - Prob. 3.16ECh. 3 - Prob. 3.17ECh. 3 - Prob. 3.18ECh. 3 - Prob. 3.19.1PCh. 3 - Prob. 3.19.2PCh. 3 - Prob. 3.20PCh. 3 - Prob. 3.21PCh. 3 - Prob. 3.22PCh. 3 - Prob. 3.23PCh. 3 - Prob. 3.24PCh. 3 - Prob. 3.25PCh. 3 - Prob. 3.26PCh. 3 - Prob. 3.27PCh. 3 - Prob. 3.28PCh. 3 - Prob. 3.29PCh. 3 - Consolidated Worksheet at End of the First Year of...Ch. 3 - Prob. 3.31P
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