Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

4. On January 1, 2016, Parent Company purchased 100% of the common stock of Subsidiary Company for $390,000. On this date, Subsidiary had common stock,

image text in transcribed

4. On January 1, 2016, Parent Company purchased 100% of the common stock of Subsidiary Company for $390,000. On this date, Subsidiary had common stock, other paid in capital, and retained earnings of $50,000,$100,000, and $200,000 respectively. Any excess of cost over book value is due to goodwill. Parent accounts for the Investment in Subsidiary using the simple equity method. On January 1, 2017, Parent purchased equipment for $204,120 and immediately leased the equipment to Subsidiary on a 4-year lease. The minimum lease payments of $60,000 are to be made annually on January 1 , beginning immediately, for a total of 4 payments. The implicit interest rate is 12%. The lease provides for an automatic transfer of title at the end of 4 years. The estimated useful life of the equipment is 6 years. The lease has been capitalized by both companies. A lease amortization schedule, applicable to either company, is presented below: On January 1, 2017 Parent held merchandise acquired from Subsidiary for $10,000. During 2017 , subsidiary sold merchandise to Parent for $50,000, of which $15,000 is held by Parent on December 31, 2017. Subsidiary's usual gross profit on affiliated sales is 40%. Required: Complete the worksheet for consolidated financial statements for the year ended December 31 , 2017. Round all computations to the nearest dollar. (The worksheet below can be copied into Excel. Add rows as needed.) Also, prepare journal entries for the eliminations. (No explanations)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Audit And Assurance Q And A 2016

Authors: ACA Simplified

1st Edition

1523200464, 978-1523200467

More Books

Students also viewed these Accounting questions

Question

Draw a physical data flow diagram for Problem 8.

Answered: 1 week ago