Ch$.8$ Homework Assignment, Comprehensive Problem: Intercompany Transfers

On January $1,20$X$5,$ Pond Corporation purchased $75$ percent of Skate Company$$s stock at underlying book value. At that date, the fair value of the noncontrolling interest was equal to $25$ percent of Skate$$s book value. The balance sheets for Pond and Skate at January $1,20$X$8,$ and December $31,20$X$8,$ and income statements for $20$X$8$ were reported as follows:

Pond Corporation Skate Company

January $1$ December $31$ January $1$ December $31$

Cash $$57,600$ $$53,100$ $$10,000$ $$47,000$

Accounts Receivable $130,000176,00060,00065,000$

Interest & Other Receivables $40,00045,0008,00010,000$

Inventory $100,000140,00050,00050,000$

Land $50,00050,00022,00022,000$

Buildings & Equipment $400,000400,000240,000240,000$

Accumulated Depreciation $(150,000)(185,000)(70,000)(94,000)$

Investment in Skate Company

Stock $122,100139,050$

Bonds $42,40042,400$

Investment in Tin Co$.$ Bonds $135,000134,000$

Total Assets $$927,100$ $$994,550$ $$320,000$ $$340,000$

Accounts Payable $$60,000$ $$65,000$ $$16,500$ $$11,000$

Interest & Other Payable $40,00045,0007,00012,000$

Bonds Payable $300,000300,000100,000100,000$

Discount on Bonds Pauyable $(3,500)(3,000)$

Common Stock $150,000150,00030,00030,000$

Additional Paid in Capital $155,000155,00020,00020,000$

Retained Earnings $222,500279,550150,000170,000$

Total Liabiities and Equity $$927,500$ $$994,550$ $$320,000$ $$340,000$

$20$X$8$ Income Statements

Pond Corporation Skate Company

Sales $$450,000$ $$250,000$

Income from Skate Co$.24,450$

Interest Income $18,500$

Total Revenue $$492,950$ $$250,000$

Cost of Goods Sold $285,000136,000$

Other Operating Expenses $50,00040,000$

Depreciation Expense $35,00024,000$

Interest Expense $24,00010,500$

Miscellaneous Expense $11,900$ $$405,9009,500$ $$220,000$

Total $87,05030,000$

"Additional Information

$1.$ Pond sold a building to skate for $$65,000$ on December $31,20$X$7.$ Pond had purchased the building for $$125,000$ and was depreciating it on the straight$-$line basis over $25$ years. At the time of sale, Pond reported accumulated depreciation of $$75,000$ and a remaining life of $10$ years. Assume Pond uses the fully adjusted equity method.

$2.$ On July $1,20$X$6,$ Skate sold land that had purchased for $$22,000$ to Pond for $$35,000.$ Pond is planning to build a new warehouse on the property prior to the end of $20$X$9.$

$3.$ Skate issued $$100,000,$ par value $10-$year bonds with a coupon rate of $10$ percent on January $1,20$X$5,$ at $$95,000.$ On December $31,20$X$7,$ Pond purchases $$40,000$ par value of Skate$$s bonds for $$42,800.$ Both companies amortize the bond premiums and discounts on a straight$-$line basis. Interest payments are made on July $1$ and January $1.$

$4.$ Pond and Skate paid dividends of $$30,000$ and $$10,000,$ respectively, in $20$X$8."$

Required

$1.$Prepare all applicable $$pictures$,$ answering each question, related to each intercompany transaction $($tabs $2-3).$

$2.$ Prepare all applicable equity method entries $($tab $4)$ for the year ended, December $31,20$X$8.$