3. Will rate
On January 1, 2013, Piper Company acquired an 80% interest in Sand Company for $2,189,800. At that time the common stock and retained earnings of Sand Company were $1,713,600 and $683,300, respectively. Differences between the fair value and the book value of the identifiable assets of Sand Company were as follows:
| | | Fair Value in Excess of Book Value |
| Inventory | | $46,400 |
| Equipment (net) | | 52,200 |
The book values of all other assets and liabilities of Sand Company were equal to their fair values on January 1, 2013. The equipment had a remaining useful life of eight years. Inventory is accounted for on a FIFO basis. Sand Companys reported net income and declared dividends for 2013 through 2015 are shown here:
| | | 2013 | | 2014 | | 2015 |
| Net Income | | $100,200 | | $157,200 | | $78,600 |
| Dividends | | 20,100 | | 28,600 | | 14,200 |
Prepare the eliminating/adjusting entries needed on the consolidated worksheet for the years ended 2013, 2014, and 2015.
Solve part C, EQUITY METHOD
On January 1, 2013, Piper Company acquired an 80% interest in Sand Company for $2,189,800. At that time the common stock and retained earnings of Sand Company were $1,713,600 and $683,300, respectively. Differences between the fair value and the book value of the identifiable assets of Sand Company were as follows: Fair Value in Excess of Book Value $46,400 52,200 Inventory Equipment (net) The book values of all other assets and liabilities of Sand Company were equal to their fair values on January 1, 2013. The equipment had a remaining useful life of eight years. Inventory is accounted for on a FIFO basis. Sand Company's reported net income and declared dividends for 2013 through 2015 are shown here: Net Income Dividends 2013 $100,200 20,100 2014 $157,200 28,600 2015 $78,600 14,200 Prepare the eliminating/adjusting entries needed on the consolidated worksheet for the years ended 2013, 2014, and 2015. (a) Your answer is correct. Assume the use of the cost method. (If no entry is required, select "No Entry" for the account titles and enter for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Debit Credit Date Account Titles and Explanation 2013 Dividend Income 16080 16080 Dividends Declared - Subsidiary Company (To eliminate intercompany dividends) Common Stock 1713600 683300 Retained Earnings Difference between Implied and Book Value 340350 Investment in Subsidiary 2189800 547450 Noncontrolling Interest (To eliminate the investment account) Cost of Goods Sold 46400 Equipment 45675 Depreciation Expense 6525 Goodwill 241750 340350 Difference between Implied and Book Value (To allocate and depreciate the difference between implied and book value) 2014 64080 64080 Investment in Subsidiary Retained Earnings (To establish reciprocity/convert to equity method as of 1/1/2011) Dividend Income Dividends Declared - Subsidiary Company (To eliminate intercompany dividends) Common Stock 22880 22880 1713600 Retained Earnings 763400 Difference between Implied and Book Value 340350 2253880 563470 Investment in Subsidiary Noncontrolling Interest (To eliminate investment account and create noncontrolling interest account) Retained Earnings 42340 Noncontrolling Interest 10585 Depreciation Expense 6525 Equipment 39150 Goodwill 241750 340350 Difference between Implied and Book Value (To allocate and depreciate the difference between implied and book value) 2015 166960 166960 Investment in Subsidiary Retained Earnings (To establish reciprocity/convert to equity method as of 1/1/2012) Dividend Income Dividends Declared - Subsidiary Company (To eliminate intercompany dividends) Common Stock 11360 11360 1713600 Retained Earnings 892000 Difference between Implied and Book Value 340350 2356760 589190 Investment in Subsidiary Noncontrolling Interest (To eliminate investment account and create noncontrolling interest account) Retained Earnings 47560 Noncontrolling Interest 11890 Depreciation Expense 6525 Equipment 32625 Goodwill 241750 340350 Difference between Implied and Book Value (To allocate and depreciate the difference between implied and book value) (c) Your answer is partially correct. Assume the use of the complete equity method. (If no entry is required, select "No Entry" for the account titles and enter o for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Debit Credit Date Account Titles and Explanation 2013 Equity in Subsidiary Income 37820 Dividends Declared - Subsidiary Company 16080 21740 Investment in Subsidiary (To eliminate intercompany dividends and income) Common Stock 1713600 Retained Earnings 683300 Difference between Implied and Book Value 340350 Investment in Subsidiary 2189800 547450 Noncontrolling Interest (To eliminate the investment account) Cost of Goods Sold 46400 Equipment 45675 Depreciation Expense 6525 Goodwill 241750 340350 Difference between Implied and Book Value (To allocate and depreciate the difference between implied and book value) 2014 Investment in Subsidiary Equity in Subsidiary Income Retained Earnings (To eliminate intercompany dividends and income) Common Stock MI 1713600 763400 Retained Earnings Difference between Implied and Book Value 340350 Investment in Subsidiary 2253880 563470 Noncontrolling Interest (To eliminate investment account and create noncontrolling interest account) Retained Earnings Noncontrolling Interest 42340 10585 Depreciation Expense 6525 Equipment 39150 Goodwill 241750 340350 Difference between Implied and Book Value (To allocate and depreciate the difference between implied and book value) 2015 Dividend Income Equity in Subsidiary Income TO Retained Earnings (To eliminate intercompany dividends and income) Common Stock 1713600 892000 Retained Earnings Difference between Implied and Book Value 340350 Investment in Subsidiary 2356760 589190 Noncontrolling Interest (To eliminate investment account and create noncontrolling interest account) Retained Earnings Noncontrolling Interest 47560 11890 Depreciation Expense 6525 Equipment 32625 Goodwill 241750 340350 Difference between Implied and Book Value (To allocate and depreciate the difference between implied and book value) On January 1, 2013, Piper Company acquired an 80% interest in Sand Company for $2,189,800. At that time the common stock and retained earnings of Sand Company were $1,713,600 and $683,300, respectively. Differences between the fair value and the book value of the identifiable assets of Sand Company were as follows: Fair Value in Excess of Book Value $46,400 52,200 Inventory Equipment (net) The book values of all other assets and liabilities of Sand Company were equal to their fair values on January 1, 2013. The equipment had a remaining useful life of eight years. Inventory is accounted for on a FIFO basis. Sand Company's reported net income and declared dividends for 2013 through 2015 are shown here: Net Income Dividends 2013 $100,200 20,100 2014 $157,200 28,600 2015 $78,600 14,200 Prepare the eliminating/adjusting entries needed on the consolidated worksheet for the years ended 2013, 2014, and 2015. (a) Your answer is correct. Assume the use of the cost method. (If no entry is required, select "No Entry" for the account titles and enter for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Debit Credit Date Account Titles and Explanation 2013 Dividend Income 16080 16080 Dividends Declared - Subsidiary Company (To eliminate intercompany dividends) Common Stock 1713600 683300 Retained Earnings Difference between Implied and Book Value 340350 Investment in Subsidiary 2189800 547450 Noncontrolling Interest (To eliminate the investment account) Cost of Goods Sold 46400 Equipment 45675 Depreciation Expense 6525 Goodwill 241750 340350 Difference between Implied and Book Value (To allocate and depreciate the difference between implied and book value) 2014 64080 64080 Investment in Subsidiary Retained Earnings (To establish reciprocity/convert to equity method as of 1/1/2011) Dividend Income Dividends Declared - Subsidiary Company (To eliminate intercompany dividends) Common Stock 22880 22880 1713600 Retained Earnings 763400 Difference between Implied and Book Value 340350 2253880 563470 Investment in Subsidiary Noncontrolling Interest (To eliminate investment account and create noncontrolling interest account) Retained Earnings 42340 Noncontrolling Interest 10585 Depreciation Expense 6525 Equipment 39150 Goodwill 241750 340350 Difference between Implied and Book Value (To allocate and depreciate the difference between implied and book value) 2015 166960 166960 Investment in Subsidiary Retained Earnings (To establish reciprocity/convert to equity method as of 1/1/2012) Dividend Income Dividends Declared - Subsidiary Company (To eliminate intercompany dividends) Common Stock 11360 11360 1713600 Retained Earnings 892000 Difference between Implied and Book Value 340350 2356760 589190 Investment in Subsidiary Noncontrolling Interest (To eliminate investment account and create noncontrolling interest account) Retained Earnings 47560 Noncontrolling Interest 11890 Depreciation Expense 6525 Equipment 32625 Goodwill 241750 340350 Difference between Implied and Book Value (To allocate and depreciate the difference between implied and book value) (c) Your answer is partially correct. Assume the use of the complete equity method. (If no entry is required, select "No Entry" for the account titles and enter o for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Debit Credit Date Account Titles and Explanation 2013 Equity in Subsidiary Income 37820 Dividends Declared - Subsidiary Company 16080 21740 Investment in Subsidiary (To eliminate intercompany dividends and income) Common Stock 1713600 Retained Earnings 683300 Difference between Implied and Book Value 340350 Investment in Subsidiary 2189800 547450 Noncontrolling Interest (To eliminate the investment account) Cost of Goods Sold 46400 Equipment 45675 Depreciation Expense 6525 Goodwill 241750 340350 Difference between Implied and Book Value (To allocate and depreciate the difference between implied and book value) 2014 Investment in Subsidiary Equity in Subsidiary Income Retained Earnings (To eliminate intercompany dividends and income) Common Stock MI 1713600 763400 Retained Earnings Difference between Implied and Book Value 340350 Investment in Subsidiary 2253880 563470 Noncontrolling Interest (To eliminate investment account and create noncontrolling interest account) Retained Earnings Noncontrolling Interest 42340 10585 Depreciation Expense 6525 Equipment 39150 Goodwill 241750 340350 Difference between Implied and Book Value (To allocate and depreciate the difference between implied and book value) 2015 Dividend Income Equity in Subsidiary Income TO Retained Earnings (To eliminate intercompany dividends and income) Common Stock 1713600 892000 Retained Earnings Difference between Implied and Book Value 340350 Investment in Subsidiary 2356760 589190 Noncontrolling Interest (To eliminate investment account and create noncontrolling interest account) Retained Earnings Noncontrolling Interest 47560 11890 Depreciation Expense 6525 Equipment 32625 Goodwill 241750 340350 Difference between Implied and Book Value (To allocate and depreciate the difference between implied and book value)
