Hello,

I need answers for the questions attached in the file. It is for consolidation.

Regards

Niket

Consolidations Part 2- Problems 1. In January 2012, Wallace, Inc. acquired a 25% interest in Minaj, Inc. for $1,750,000, giving Wallace significant influence over Minaj. Any excess of purchase price over book value was considered goodwill. In 2012, Minaj reported net income of $525,000 and paid total dividends amounting to $175,000. Required: Prepare Wallace's 2012 journal entries related to its investment in Minaj. 2 McGuinn, Inc. owns a 40% interest in Cervantes Co., giving it representation on the investee's board of directors. At the beginning of the year, the Equity Investment was carried on McGuinn's balance sheet at $750,000. During the year, Cervantes reported net income of $240,000 and paid McGuinn a dividend of $48,000. In addition, McGuinn sold inventory to Cervantes , recording a gross profit of $60,000 on the sale. At the end of the year, 25% of the merchandise remained unsold by Cervantes . Required: a. Prepare the equity method journal entry to defer the unrealized inventory gross profit. b. How much income should McGuinn report from Cervantes during the year? c. What is the balance in the Equity Investment at the end of the year? 3. McClellan, Inc. acquires all of the outstanding common stock of Cranston Enterprises for $150,000 cash. On the acquisition date, the subsidiary had Common Stock of $30,000 and Retained Earnings of $30,000. A patent unrecorded by Cranston was valued at $60,000. Required: a. Prepare the entry on McClellan's books to record the purchase. b. Prepare all necessary consolidation entries. 4. On January 2, 2013, McCoy Corporation's stockholders' equity accounts were as follows: Common Stock, $1 par Additional paid-in- capital Retained Earnings $50,000 100,000 225,000 McCoy's assets and liabilities had book values equal to market values except for inventory, land and building which were undervalued by $30,000, $20,000, and $25,000, respectively. On January 2, 2013, Express Corp. purchased all of McCoy's common stock for $475,000 cash. There was no contingent consideration in the agreement to combine. Required: Prepare all necessary consolidation entries for a January 2, 2013 balance sheet. 5. Masterson Company acquires a 80% interest in its subsidiary for a purchase price of $620,800. The excess of the purchase price over the book value of the subsidiary's Stockholders' Equity is allocated to a building (in PPE, net) that the parent believes is worth $50,000 more than its book value, an unrecorded Patent that the parent valued at $100,000, and Goodwill of $150,000, 80% of which is allocated to the parent. The parent and the subsidiary report the following balance sheets on the acquisition date: Masterson Cash Accounts receivable Inventory Equity Investment PPE, net Subsidiary $ 920,753 725,760 1,099,980 620,800 5,291,244 $8,658,537 $107,576 165,648 212,772 393,652 $879,648 Masterson Current Liabilities Long-term Liabilities Common Stock APIC Retained Earnings Subsidiary $ 814,779 3,379,200 927,045 688,905 2,848,608 $8,658,537 $165,648 238,000 47,600 59,500 368,900 $879,648 Required: Prepare the consolidation journal entries on the acquisition date. 6 . Akers Company, a 100% owned subsidiary of Muhs Corporation, sells inventory to Muhs at a 30% profit on selling price. The following data are available pertaining to inter-company purchases by Muhs: Inter-company sales: 2014: $ 9,600 2015: $14,400 2016: $18,000 Unsold at year end based on selling price: 2014: $ 1,440 2015: $4,800 2016: $3,600 Akers' profit numbers were $84,000, $102,000 and $112,800 for 2014, 2015, and 2016, respectively. Muhs received dividends from Akers of $12,000 for 2014 and 2015, and $18,000 for 2016. What is the balance in Equity Income for 2014? a. $84,000 b. $82,560 c. $83,568 d. $74,400