35. On January 1, 20X1, Parent Company acquired 100% of the common stock of Subsidiary Company for $750,000. On this date Subsidiary had total owners’ equity of $540,000.
Any excess of cost over book value is attributable to land, undervalued $10,000, and to goodwill.
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During 20X1 and 20X2, Parent has appropriately accounted for its investment in Subsidiary using the simple equity method.
On January 1, 20X2, Parent held merchandise acquired from Subsidiary for $10,000. During 20X2, Subsidiary sold merchandise to Parent for $100,000, of which $20,000 is held by Parent on December 31, 20X2. Subsidiary’s usual gross profit on affiliated sales is 40%.
On December 31, 20X2, Parent still owes Subsidiary $20,000 for merchandise acquired in December.
On January 1, 20X2, Parent sold to Subsidiary some equipment with a cost of $50,000 and a book value of $20,000. The sales price was $40,000. Subsidiary is depreciating the equipment over a five-year life, assuming no salvage value and using the straight-line method.
Required:
Complete the Figure 4-3 worksheet for consolidated financial statements for the year ended December 31, 20X2.
7. On January 1, 20X1, Parent Company acquired 80% of the common stock of Subsidiary Company for $560,000. On this date Subsidiary had total owners’ equity of $540,000, including retained earnings of $240,000. During 20X1, Subsidiary had net income of $60,000 and paid no dividends.
Any excess of cost over book value is attributable to land, undervalued $10,000, and to goodwill.
During 20X1 and 20X2, Parent has appropriately accounted for its investment in Subsidiary using the cost method.
On January 1, 20X2, Parent held merchandise acquired from Subsidiary for $10,000. During 20X2, Subsidiary sold merchandise to Parent for $100,000, of which $20,000 is held by Parent on December 31, 20X2. Subsidiary’s usual gross profit on affiliated sales is 40%.
On December 31, 20X2, Parent still owes Subsidiary $20,000 for merchandise acquired in December.
On January 1, 20X2, Parent sold to Subsidiary some equipment with a cost of $50,000 and a book value of $20,000. The sales price was $40,000. Subsidiary is depreciating the equipment over a five-year life, assuming no salvage value and using the straight-line method.
Required:
Complete the Figure 4-4 worksheet for consolidated financial statements for the year ended December 31, 20X2.
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Chapter 4
8. On January 1, 20X1, Powers Company acquired 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 patents is to be amortized over 20 years. The Powers company concept (pro rata fair value approach) is to be used in any write up of assets.
Powers 7% Bonds Payable are due in 20X8 and Sculley 12% Bonds are due in 20X5.
On July 1, 20X2 Sculley borrowed $100,000 from Powers with a 10% 1-Year Note.
During 20X1 and 20X2, Powers has appropriately accounted for its investment in Sculley using the cost method.
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 which is still held by Powers on December 31, 20X2. Sculley’s usual gross profit on affiliated sales is 50%.
On December 31, 20X1, Powers sold equipment to Sculley at a gain of $10,000. During 20X2, the equipment was used by Sculley. Depreciation is being computed using the straight-line method, a five-year life, and no salvage value.
Required:
a. Using the information above or on the Figure 4-5 worksheet, prepare a determination and distribution of excess schedule.
b. Complete the Figure 4-5 worksheet for consolidated financial statements for the year ended December 31, 20X2.
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Chapter 4
Chapter 4
9. On January 1, 20X1, Powers Company acquired 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. The Powers company concept (pro rata fair value approach) is to be used in any write up of assets.
During 20X1 and 20X2, Powers has appropriately accounted for its investment in Sculley using the simple equity method.
Powers 7% Bonds Payable are due in 20X8 and Sculley 12% Bonds are due in 20X5.
On July 1, 20X2 Sculley borrowed $100,000 from Powers with a 10% 1-Year Note.
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 which is still held by Powers on December 31, 20X2. Sculley’s usual gross profit on affiliated sales is 50%.
On December 31, 20X1, Powers sold equipment to Sculley at a gain of $10,000. During 20X2, the equipment was used by Sculley. Depreciation is being computed using the straight-line method, a five-year life, and no salvage value.
Required:
a. Using the information above or on the Figure 4-6 worksheet, prepare a determination and distribution of excess schedule.
b. Complete the Figure 4-6 worksheet for consolidated financial statements for the year ended December 31, 20X2.
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4-23
Chapter 4
10. On January 1, 20X1, Powers Company acquired 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 earning 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 the patents. FIFO is used for inventories. The equipment has a remaining life of five years and straight-line depreciation is used. The excess attributable to the patents is to be amortized over 20 years. The Powers company concept (pro rata fair value approach) is to be used in any write up of assets.
During 20X1 and 20X2, Powers has appropriately accounted for its investment in Sculley using the sophisticated equity method.
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 which is still held by Powers on December 31, 20X2. Sculley’s usual gross profit on affiliated sales is 50%.
On December 31, 20X1, Powers sold equipment to Sculley at a gain of $10,000. During 20X2, the equipment was used by Sculley. Depreciation is being computed using the straight-line method, a five-year life, and no salvage value.
Required:
a. Using the information above or on the Figure 4-7 worksheet, prepare a determination and distribution of excess schedule.
b. Complete the Figure 4-7 worksheet for consolidated financial statements for the year ended December 31, 20X2.
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Chapter 4
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Chapter 4
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