CUMULATIVE PROBLEM 1:

On January 1, 2014, P acquired 60% of Subs common stock for $312,000 cash. On that date, Sub reported common stock of $100,000 and retained earnings of $200,000. Except for a patent (with a 12-year remaining life) which was undervalued by $90,000, the book values of Subs identifiable assets equaled their fair market values. On January 1, 2016, Subs retained earnings had increased to $300,000. During 2016, Sub earned net income of $25,000 and paid dividends of $4,000.

1.Based upon the above information and assuming that P maintains its investment in Sub using the partial equity method, prepare the 12/31/16 elimination entries. 2.Based upon the above information and assuming that P maintains its investment in Sub using the historical cost method, prepare the 12/31/16 elimination entries.

Since Parent acquired Sub, Sub has been selling merchandise to Parent. The following are the sales from Sub to Parent:

YearSelling Price Cost to Sub Remaining in Ending Inventory 2014 $100,000 $ 80,000 $20,000 2015 $125,000 $100,000 $40,000 2016 $120,000 $ 90,000 $40,000

On December 31, 2016, Parent still owed Sub $60,000 for the inventory purchases. 3.Prepare the 12/31/16 elimination entries for the intercompany merchandise sales.

On January 20, 2014, Parent sold $15,000 land to Sub for $22,000.

4.Prepare the 12/31/16 elimination entries for the intercompany land sale.

On January 1, 2015, Parent acquired $20,000 of Subs 8% stated interest rate bonds for $18,732, for an effective yield of 10%. On the date that Parent acquired Subs bonds, the bonds had a book value (on Subs books) of $21,386, for an effective yield of 6%.

5.Prepare the 12/31/15 AND 12/31/16 elimination entries for the bond purchase.

6. Determine the NCIs share of 2016 consolidated net income. BOND PROBLEM:

On January 1, 2012, Sub issued $400,000 of its 9%, 10-year bonds at 105. On January 1, 2014, Parent acquired these bonds at 96. Both companies utilize the straight line method to amortize the bonds. Prepare the elimination entries for the bonds on: December 31, 2014 December 31, 2015 AND December 31, 2016.

HINT: Set up the charts as you would for the effective interest method except use the straight line method.