I need help with B
During 20X2, Prince sold a plot of land that It had purchased several years before to Sword at a galn of $7,000; Sword continues to hold the land. In 20X6, Prince and Sword entered Into a five-year contract under which Prince provides management consulting services to Sword on a continulng basis, Sword pays Prince a fixed fee of $88,000 per year for these services. At December 31, 20X8 Sword owed Prince $22,000 as the final 20x8 quarterly payment under the contract. On January 2, 20X8, Prince pald $240,000 to Sword to purchase equipment that Sword was then carrying at $280,000. Sword had purchased that equipment on December 27, 20X2, for $420,000. The equipment Is expected to have a total 15-year life and no salvage value. The amount of the differential assigned to goodwill has not been Impalred. At December 31, 20X8, trial balances for Prince and Sword appeared as follows: Prince Corporation Debit Sword Distributors Inc Credit Credit Debit Item Cash Current Receivables Inventory Investment in Sword Distributors Land Buildings & Equipment Cost of Goods Sold Depreciation & Amortization Other Expenses Dividends Declared Accumulated Depreciation Current Payables Bonds Payable Common Stock Additional Paid-in Capital Retained Earnings, January 1 Sales Other Income or Loss Income from Sword Distributors $63,788 185,808 293,888 2,837,375 485,808 2,42e,8e8 2,188,8e8 195,808 1,375,8e8 45,808 $ 51,8e8 93,488 235,9e8 1,288,8e8 3,188,888 517,8e0 72,8e8 211,8e8 15,888 $1,104,800 92,288 831,888 98,888 1,267,8e8 1,464,80e 4,832,875 96,888 15e,888 $9,927,875 484,800 377,388 188,888 948,888 1,298,0e8 1,34e,8e8 996,888 32,8e8 $9,927,875 $5,535,308 $5,535,308 Total As of December 31, 20X8, Sword had declared but not yet pald its fourth-quarter dividend of $5,000. Both companles use straight-lIine depreclation and amortization. Prince uses the fully adjusted equity method to account for Its Investment In Sword. Requlred a. Compute the amount of the differential as of January 1, 20X8 5 37,500 Remaining differential b. Verify the balance In Prince's Investment in Sword Distributors account as of December 31, 20x8. Balance in Investment in Sword Account During 20X2, Prince sold a plot of land that It had purchased several years before to Sword at a galn of $7,000; Sword continues to hold the land. In 20X6, Prince and Sword entered Into a five-year contract under which Prince provides management consulting services to Sword on a continulng basis, Sword pays Prince a fixed fee of $88,000 per year for these services. At December 31, 20X8 Sword owed Prince $22,000 as the final 20x8 quarterly payment under the contract. On January 2, 20X8, Prince pald $240,000 to Sword to purchase equipment that Sword was then carrying at $280,000. Sword had purchased that equipment on December 27, 20X2, for $420,000. The equipment Is expected to have a total 15-year life and no salvage value. The amount of the differential assigned to goodwill has not been Impalred. At December 31, 20X8, trial balances for Prince and Sword appeared as follows: Prince Corporation Debit Sword Distributors Inc Credit Credit Debit Item Cash Current Receivables Inventory Investment in Sword Distributors Land Buildings & Equipment Cost of Goods Sold Depreciation & Amortization Other Expenses Dividends Declared Accumulated Depreciation Current Payables Bonds Payable Common Stock Additional Paid-in Capital Retained Earnings, January 1 Sales Other Income or Loss Income from Sword Distributors $63,788 185,808 293,888 2,837,375 485,808 2,42e,8e8 2,188,8e8 195,808 1,375,8e8 45,808 $ 51,8e8 93,488 235,9e8 1,288,8e8 3,188,888 517,8e0 72,8e8 211,8e8 15,888 $1,104,800 92,288 831,888 98,888 1,267,8e8 1,464,80e 4,832,875 96,888 15e,888 $9,927,875 484,800 377,388 188,888 948,888 1,298,0e8 1,34e,8e8 996,888 32,8e8 $9,927,875 $5,535,308 $5,535,308 Total As of December 31, 20X8, Sword had declared but not yet pald its fourth-quarter dividend of $5,000. Both companles use straight-lIine depreclation and amortization. Prince uses the fully adjusted equity method to account for Its Investment In Sword. Requlred a. Compute the amount of the differential as of January 1, 20X8 5 37,500 Remaining differential b. Verify the balance In Prince's Investment in Sword Distributors account as of December 31, 20x8. Balance in Investment in Sword Account
