Question

Assume that on 1/1/20 Grace acquired 80% of Smith for $440,000 when Smith's equity included $200,000...

Assume that on 1/1/20 Grace acquired 80% of Smith for $440,000 when Smith's equity included $200,000 of retained earnings and $200,000 of capital stock. An appraisal of Smith's assets could not identify any misvalued assets. During 2020, Smith earned $100,000 and paid $30,000 of dividends. Grace uses the cost/initial value method to account for its investment in Smith. Assume that Grace is consolidating the trial balances of both companies on 12/31/20. What worksheet consolidation entries should be made?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

In cost or initial value method the investment remains at initially recorded cost , that is at $ 4,40,000 and dividend income received as cash recognised in income account as dividend revenue.

No adjustments are recorded in the investment account for current year operations, dividend paid by the subsidiary or amortization of purchase price allocations.

Therefore investment in Smith recorded in assets in financial statements also the dividend income 80%*30000=$24,000 recognised in the revenue account.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
On January 1, 2014, Pirate Company acquired an 80% interest in Sun Company for $425,000. On...
On January 1, 2014, Pirate Company acquired an 80% interest in Sun Company for $425,000. On that date, Sun reported stockholder’s equity of $400,000: $100,000 in common stock and $300,000 in retained earnings. In setting the acquisition price, Pirate appraised three accounts at values different from the balances reported within Sun’s financial records: Buildings (8-year remaining life): Undervalued by $32,500 Land: Undervalued by $50,000 Royalty agreement (20-year remaining life): Not previously recorded; Valued at $30,000 At December 31, 2018, the...
On January 1, 20X9, Peery Company acquired 100 percent of Standard Company's common shares at underlying...
On January 1, 20X9, Peery Company acquired 100 percent of Standard Company's common shares at underlying book value. Peery uses the equity method in accounting for its ownership of Standard. On December 31, 20X9, the trial balances of the two companies are as follows:                                             Peery Co.                               Standard Co. Item                          Debit             Credit             Debit                        Credit Current Assets   $ 238,000             $    95,000            Depreciable Assets 300,000             170,000            Investment...
Power Corporation acquired 100 percent ownership of Upland Products Company on January 1, 20X1, for $200,000....
Power Corporation acquired 100 percent ownership of Upland Products Company on January 1, 20X1, for $200,000. On that date, Upland reported retained earnings of $50,000 and had $100,000 of common stock outstanding. Power has used the equity method in accounting for its investment in Upland. The trial balances for the two companies on December 31, 20X5, appear below. Power Corporation Upland Products Company Item Debit Credit Debit Credit Cash & Receivables $ 43,000 $ 65,000 Inventory 260,000 90,000 Land 80,000...
On January 1, Jarel acquired 80 percent of the outstanding voting stock of Suarez for $260,000...
On January 1, Jarel acquired 80 percent of the outstanding voting stock of Suarez for $260,000 cash consideration. The remaining 20 percent of Suarez had an acquisition-date fair value of $65,000. On January 1, Suarez possessed equipment (five-year remaining life) that was undervalued on its books by $25,000. Suarez also had developed several secret formulas that Jarel assessed at $50,000. These formulas, although not recorded on Suarez’s financial records, were estimated to have a 20-year future life. As of December...
Pie Corporation acquired 75 percent of Slice Company’s ownership on January 1, 20X8, for $96,000. At...
Pie Corporation acquired 75 percent of Slice Company’s ownership on January 1, 20X8, for $96,000. At that date, the fair value of the noncontrolling interest was $32,000. The book value of Slice’s net assets at acquisition was $100,000. The book values and fair values of Slice’s assets and liabilities were equal, except for Slice’s buildings and equipment, which were worth $20,000 more than book value. Accumulated depreciation on the buildings and equipment was $30,000 on the acquisition date. Buildings and...
PAM Co. acquired all of the common stock of Sista Co. on January 1, 2017. As...
PAM Co. acquired all of the common stock of Sista Co. on January 1, 2017. As of that date, Sista had the following trial balance: Debit Credit Accounts payable $ 60,000 Accounts receivable $ 50,000 Additional paid-in capital 60,000 Buildings (net) (20-year life) 140,000 Cash and short-term investments 70,000 Common stock 300,000 Equipment (net) (8-year life) 240,000 Intangible assets (indefinite life) 110,000 Land 90,000 Long-term liabilities (mature 12/31/19) 180,000 Retained earnings, 1/1/17 120,000 Supplies 20,000 Totals $ 720,000 $ 720,000...
Prime Company acquired 75% of the common stock of Second Company January 1, year one, for...
Prime Company acquired 75% of the common stock of Second Company January 1, year one, for $450,000 The consideration given was proportional to Second's fair value. On that date, Second had the following trial balance: account debit credit Additional paid in capital $100,000 Building (12-year life) $250,000 Common stock 170,000 Current assets 170,000 Equipment (6-yr life) 160,000 Land 110,000 Liabilities (due in 4 years) 300,000 Retained earnings 1/year 1 120,000 Totals $690,000 $690,000 During year one, Second reported net income...
Pizza Corporation acquired 80 percent ownership of Slice Products Company on January 1, 20X1, for $147,000....
Pizza Corporation acquired 80 percent ownership of Slice Products Company on January 1, 20X1, for $147,000. On that date, the fair value of the noncontrolling interest was $36,750, and Slice reported retained earnings of $41,000 and had $96,000 of common stock outstanding. Pizza has used the equity method in accounting for its investment in Slice. Trial balance data for the two companies on December 31, 20X5, are as follows:    Pizza Corporation Slice Products Company Item Debit Credit Debit Credit...
Star & Anderson SAOG. acquired all of the common stock of Wilkinson SAOG. on January 1,...
Star & Anderson SAOG. acquired all of the common stock of Wilkinson SAOG. on January 1, 2018.  As of that date, Wilkinson had the following trial balance: Particulars Debit Credit Sundry Creditors 30,000 Land & Buildings (10 year  life) 70,000 Additional Paid-in –Capital 30,000 Sundry Debtors 25,000 Cash and bank balances 18,000 Short Term Investments 17,000 Equity share capital 150,000 Inventory 55,000 Plant and Equipment (4 year life) 120,000 Land 45,000 Long term borrowings ( Maturity 31/12/2020 90,000 Retained earnings (Opening Balance)...
On January 1, 2013, Starbucks acquired 100% of Dunkin. On this date: Starbucks acquired 100% of...
On January 1, 2013, Starbucks acquired 100% of Dunkin. On this date: Starbucks acquired 100% of Dunkin’s outstanding common stock for $842,000 in cash. Dunkin’s Buildings had a FV in excess of BV of $72,000 and remaining Useful Life was 12 years. Dunkin’s Equipment had a FV in excess of BV of $10,000 and remaining Useful Life was 10 years. Dunkin had an unrecorded Patent with a FMV $20,000 and remaining Useful Life was 20 years. Dunkin’s Stockholder’s Equity total...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT