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1 ) Intercompany sale of inventory - 2 0 X 9 During 2 0 X 9 , Soup sold inventory to Premium that had an

1) Intercompany sale of inventory-20X9During 20X9, Soup sold inventory to Premium that had an original cost of $20,000 and was sold to Premium for$45,000 By December 31,20X9, Premium still had on hand in inventory$15,000 of the amount purchased from Soup.This inventory at December 31,20X9 was then sold by Premium in 20X10.2) Intercompany sale of inventory -20X10During 20X10, Soup sold inventory to Premium for a sales price equal to$70,000 which provides a gross margin to Soup of25%At December 31,20X10, Premium still had 15%of this inventory still on hand.3) Intercompany sale of Equipment-20X10On January 1,20X10, Premium sold equipment to Soup that it purchased for$1,50,000 on that date. It was sold to Soup for$2,00,000 The equipment is being depreciated on a straight line basis over its useful life20years with no residual value.Required:Using the tab titled "student worksheet" complete the following tasks:a. In Part 1, prepare all elimination entries necessary for Premium to consolidate Soup at December 31,20X10 for the three additional intercompany transactions identified above. b. In Part 2, complete the consolidated balances indicated on the Student worksheet.As a reminder, your numbers need to be supported - i.e. calculated within a cell or linked via excel formula to their source, where appropriate. Use WORDS to explain your logic -- what are you adding/subtracting - as your logic is more important than the final #.Your consolidated working paper must link to the appropriate adjustments, rather than them being just typed in.SFPsSFPsAt December 31,20X10At January 1,20X9Premium Corp.Soup Inc. Assets:Premium Corp.Soup Inc. Cash $50,000 $1,45,000 Cash $1,10,000 $1,25,000 Accounts and other receivables2,40,00090,000 Accounts and other receivables 3,20,0001,00,000 Inventory1,50,00080,000 Inventory 1,10,00055,000 Buildings and equipment16,00,00010,40,000 Buildings and equipment 11,50,0006,50,000 Accumulated amortization - buildings and equipment (5,70,000)(4,45,000)Accumulated depreciation (2,87,500)(3,00,000)Land 1,80,000 Land -2,00,000 Investment in Soup$10,00,000 Investment in Soup 10,00,000- Other investments 70,00030,000 $24,02,500 $8,30,000 Long term receivables 2,00,000 $25,40,000 $13,20,000 Accounts payable $2,00,000 $1,30,000 Notes payable 1,02,5002,40,000 Liabilities and equities: Common shares 18,00,0002,10,000 Accounts payable (1,50,000)1,20,000 Retained earnings 3,00,0002,50,000 Notes payable 4,70,0004,15,000 $24,02,500 $8,30,000 Common shares 18,00,0002,10,000 Retained earnings 4,20,0005,75,000 $25,40,000 $13,20,000 SCIFor the year ended December 31,20X10Premium Corp.Soup Inc. Sales and other income $15,05,000 $9,00,000 Dividend income40,000 $15,45,000 $9,00,000 Cost of sales10,00,0005,40,000 Amortization expense 70,00045,000 Other expenses2,25,0002,15,000 Income tax expense50,00025,00013,45,0008,25,000 Net Income and Comprehensive income $2,00,000 $75,000 Student worksheet Jolene Kendrew, Michelle Lysak, Keri Norrie Camosun CollegeNote that greyed section is duplicated from homework #3 solution - see the response area below after the greyed sectionPurchase Price DiscrepancyExhibit APurchase Price$10,00,0000.80$12,50,000Book Value at Acquisition4,60,0004,60,0007,90,000FMV Increments:Additional (Less) Expense for20X1020X9-20X10NIRetained Earnings(2 years)Patents1,50,00053000060,000Building and equipment52,500105,25010,500Notes payable38,40049,60019,2002,40,90044,85089,7002,40,90044,85089,700Goodwill5,49,10054,91054,9107,90,00099,7601,44,6101Investment elimination entriesDR Common shares2,10,000DR Retained earnings2,50,000DR Patents1,50,000DR Buildings and equipment52,500DR Notes payable38,400DR Goodwill5,49,100 CR Investment in S10,00,000 $- CR NCSHI2,50,000 Accumulated depreciation entry1ADR Accumulated amortization3,00,000 CR Buildings and equipment3,00,0002Fair value increment amortization2ADR Amortization expense5,250DR Retained earnings5,250 CR A/A Building and equipment10,5002BDR Amortization expense30,000DR Retained earnings30,000 CR Patent60,0002CDR Other expense9,600 DR Retained earnings9,600 CR Notes payable 19,2002DDR Other expense (or impairment expense)54,910 CR Goodwill 54,9103NCSHI share of REAllocation RE to NCSHISub RE, Dec 31,20X10 $5,75,000 DR Retained earnings36,078Sub RE, Jan 1,20X9 $2,50,000 CR NCSHI36,078 Increase in RE since acquisition $3,25,000***NCSHI's value has increase since acquisition, so we are increasing the value attributable to NCSHI with this entryFair value income adjustments $(1,44,610) $1,80,3904ADividend entryNCSHI share $36,078 DR Dividend income40,000Dividend from sub % ownership by Parent CR Retained earnings40,00050,0000.84BIntercompany loanDR Notes payable 1,50,000 CR Long term receivables1,50,000 DR Sales and other income22,000 CR Other expenses 22,000 Additional entries related to intercompany transaction information in Homework 4 tab:Calculated the below four consolidated balances, ensuring to demonstrate your logic using words + cross reference to your worksheet entriesUse WORDS to explain your logic -- what are you adding/subtracting - as your logic is more important than the final #.Use WORDS to explain your logic -- what are you adding/subtracting - as your logic is more important than the final #.The below template in Column A is provided as a guide - you can change it and all parts may not be applicable4C0Eliminate interco SaleConsolidated InventoryInterco unrealized/realized profitPremium0 Soup200000Adjustments (explain logic and link # below)Adjust NCSHI (upstream)0Eliminate interco SaleConsolidated Building and EquipmentPremium0 Interco unrealized/realized profitSoupAdjustments (explain logic and link # below)Adjust NCSHI (upstream)Consolidated Cost of Goods Sold expensePremium04E0SoupEliminate interco SaleAdjustments (explain logic and link # below)Interco unrealized/realized profitAdjust NCSHI (upstream)Consolidated amortization expensePremium - SoupAdjustments (explain logic and link # below)

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