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 80,000
Buildings & Equipment 500,000 150,000
Investment in Upland Products Stock 235,000
Cost of Goods Sold 120,000 50,000
Depreciation Expense 25,000 15,000
Inventory Losses 15,000 5,000
Dividends Declared 30,000 10,000
Accumulated Depreciation $ 205,000 $ 105,000
Accounts Payable 60,000 20,000
Notes Payable 200,000 50,000
Common Stock 300,000 100,000
Retained Earnings 318,000 90,000
Sales 200,000 100,000
Income from Subsidiary 25,000
$ 1,308,000 $ 1,308,000 $ 465,000 $ 465,000
Additional Information:
1.
On the date of combination (five years ago), the fair value of
Upland’s depreciable assets was $50,000 more than the book value.
Accumulated depreciation at that date was $10,000. The differential
assigned to depreciable assets should be written off over the
following 10-year period.
2. There was $10,000 of intercorporate receivables and
payables at the end of 20X5.
Required:
a.
Prepare all journal entries that Power recorded during 20X5
related to its investment in Upland. (If no entry is required for a
transaction/event, select "No journal entry required" in the first
account field.)