Question
C Company obtains 100 percent of A's Companys stock on January 1, 2025. As of that date, A has the following trial balance: Debit Credit
C Company obtains 100 percent of A's Companys stock on January 1, 2025. As of that date, A has the following trial balance:
Debit | Credit | ||||
Accounts payable | $ | 56,700 | |||
Accounts receivable | $ | 43,800 | |||
Additional paid-in capital | 50,000 | ||||
Buildings (net) (4-year remaining life) | 143,000 | ||||
Cash and short-term investments | 80,250 | ||||
Common stock | 250,000 | ||||
Equipment (net) (5-year remaining life) | 295,000 | ||||
Inventory | 110,500 | ||||
Land | 112,000 | ||||
Long-term liabilities (mature 12/31/28) | 171,000 | ||||
Retained earnings, 1/1/25 | 268,750 | ||||
Supplies | 11,900 | ||||
Totals | $ | 796,450 | $ | 796,450 | |
During 2025, A reported net income of $122,500 while declaring and paying dividends of $15,000. During 2026, A reported net income of $159,250 while declaring and paying dividends of $49,000.
Assume that C Company acquired A's common stock by paying $744,750 in cash. All of A's accounts are estimated to have a fair value approximately equal to present book values. C uses the partial equity method to account for its investment.
Prepare the consolidation worksheet entries for December 31, 2025, and December 31, 2026
1. Prepare entry S to eliminate stockholders' equity accounts of subsidiary.
2. Prepare entry A to recognize goodwill portion of the original acquisition fair value.
3. Prepare entry I to eliminate intra-entity income accrual for the current year based on the parent's usage of the partial equity method.
4. Prepare entry D to eliminate intra-entity dividend transfers.
5. Prepare entry E to recognize 2025 amortization expense.
6. Prepare entry *C to convert parent company figures to equity method.
7. Prepare entry S to eliminate stockholders' equity accounts of subsidiary for 2026.
8. Prepare entry A to recognize original goodwill balance.
9. Prepare entry I to eliminate Intra-entity Income accrual for the current year.
10. Prepare entry D to eliminate Intra-entity dividend transfers.
11. Prepare entry E to recognize 2026 amortization expense.
I will give a thumbs up if all 11 are answered
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