{ "key_pair_value_system": true, "answer_rating_count": "", "question_feedback_html": { "html_star": "", "html_star_feedback": "" }, "answer_average_rating_value": "", "answer_date_js": "2024-09-14T00:02:36-04:00", "answer_date": "2024-09-14 00:02:36", "is_docs_available": "", "is_excel_available": "", "is_pdf_available": "", "count_file_available": 0, "main_page": "student_question_view", "question_id": "10718894", "url": "\/study-help\/questions\/large-ltd-purchased-80-of-small-company-on-january-1-10718894", "question_creation_date_js": "2024-09-14T00:02:36-04:00", "question_creation_date": "Sep 14, 2024 12:02 AM", "meta_title": "[Solved] Large Ltd. purchased 80% of Small Company | SolutionInn", "meta_description": "Answer of - Large Ltd. purchased 80% of Small Company on January 1, Year 6, for $660,000, when the statement of financial position | SolutionInn", "meta_keywords": "large,ltd,purchased,80%,small,company,january,1,year,6,$660,000,statement", "question_title_h1": "Large Ltd. purchased 80% of Small Company on January 1, Year 6, for $660,000, when the statement of financial position for Small showed common shares", "question_title": "Large Ltd. purchased 80% of Small Company on January 1, Year 6,", "question_title_for_js_snippet": "Large Ltd purchased 80 of Small Company on January 1, Year 6, for $660,000, when the statement of financial position for Small showed common shares of $490,000 and retained earnings of $190,000 On that date, the inventory of Small was undervalued by $51,000, and a patent with an estimated remaining life of five years was overvalued by $76,000 Small reported the following subsequent to January 1, Year 6 Profit (Loss) Dividends Year 6 $ 116,000 $ 34,000 Year 7 (44,000 ) 19,000 Year 8 99,000 49,000 A test for goodwill impairment on December 31, Year 8, indicated a loss of $20,200 should be reported for Year 8 on the consolidated income statement Large uses the cost method to account for its investment in Small and reported the following for Year 8 for its separate entity statement of changes in equity Retained earnings, beginning $ 590,000 Profit 290,000 Dividends (61,000 ) Retained earnings, end $ 819,000 Required (a) Prepare the cost method journal entries of Large for each year (Omit $ sign in your response ) Year 6 General Journal Debit Credit (Click to select) Investment in Small Equity method income Dividend income Current assets Goodwill Account receivable Cash Long term investment (Click to select) Investment in Small Long term investment Account receivable Current assets Dividend income Inventories Goodwill Cash To record the purchase of 80 of Small Company (Click to select) Long term investment Investment in Small Dividend income Goodwill Cash Current assets Account receivable Inventories (Click to select) Current assets Goodwill Investment in Small Inventories Long term investment Dividend income Account receivable Cash To record dividend received from Small Company Year 7 General Journal Debit Credit (Click to select) Cash Long term investment Goodwill Current assets Account receivable Inventories Investment in Small Dividend income (Click to select) Dividend income Inventories Goodwill Long term investment Current assets Investment in Small Account receivable Cash To record dividend received from Small Company Year 8 General Journal Debit Credit (Click to select) Goodwill Current assets Cash Long term investment Dividend income Account receivable Investment in Small Inventories (Click to select) Inventories Current assets Cash Account receivable Dividend income Investment in Small Long term investment Goodwill To record dividend received from Small Company (b) Compute the following on the consolidated financial statements for the year ended December 31, Year 8 (Omit $ sign in your response ) (i) Goodwill Goodwill $ (ii) Non controlling interest on the statement of financial position Non controlling interest $ (iii) Retained earnings, beginning of year Retained earnings, beginning of year $ (iv) Profit attributable to Larges shareholders Profit attributable to Larges shareholders $ (v) Profit attributable to non controlling interest Profit attributable to non controlling interest $ (c) Now assume that Large is a private entity, uses ASPE, and chooses to use the equity method to report its investment in Small (i) Prepare Larges journal entries for each year related to its investment in Small (Omit $ sign in your response ) Year 6 General Journal Debit Credit (Click to select) Cash Investment in Small Account receivable Current assets Long term investment Dividend income Goodwill Inventories (Click to select) Current assets Dividend income Long term investment Cash Inventories Goodwill Account receivable Investment in Small To record the purchase of 80 of Small Company (Click to select) Investment in Small Dividend income Long term investment Current assets Account receivable Cash Inventories Equity method income (Click to select) Long term investment Current assets Goodwill Equity method income Dividend income Account receivable Investment in Small Inventories To record 80 of Small Company year 6 net income (Click to select) Inventories Account receivable Goodwill Cash Dividend income Investment in Small Long term investment Current assets (Click to select) Current assets Account receivable Cash Investment in Small Long term investment Dividend income Inventories Goodwill To record 80 of the dividend received from Small Company (Click to select) Goodwill Inventories Account receivable Investment in Small Current assets Equity method income Cash Long term investment (Click to select) Investment in Small Current assets Dividend income Inventories Goodwill Equity method income Cash Long term investment To record 80 of acquisition differential amortization and impairment of year 6 Year 7 General Journal Debit Credit (Click to select) Equity method loss Investment in Small Account receivable Equity method income Cash Inventories Current assets Dividend income Long term investment (Click to select) Long term investment Inventories Dividend income Current assets Investment in Small Equity method income Account receivable Cash To record 80 of Small Company year 7 net loss (Click to select) Account receivable Inventories Dividend income Investment in Small Cash Equity method income Current assets Long term investment (Click to select) Equity method income Cash Investment in Small Long term investment Current assets Inventories Account receivable Dividend income To record 80 of the dividend received from Small Company (Click to select) Current assets Long term investment Dividend income Investment in Small Cash Account receivable Equity method income Inventories (Click to select) Account receivable Investment in Small Goodwill Equity method income Long term investment Current assets Cash Equity method loss Inventories To record 80 of acquisition differential amortization and impairment of year 7 Year 8 General Journal Debit Credit (Click to select) Dividend income Inventories Equity method income Cash Long term investment Account receivable Current assets Investment in Small (Click to select) Account receivable Investment in Small Long term investment Cash Inventories Equity method income Current assets Dividend income To record 80 of Small Company year 8 net income (Click to select) Goodwill Dividend income Cash Investment in Small Long term investment Account receivable Current assets Inventories (Click to select) Current assets Dividend income Long term investment Account receivable Goodwill Cash Investment in Small Inventories To record 80 of the dividend received from Small Company (Click to select) Investment in Small Dividend income Current assets Equity method income Long term investment Inventories Cash Account receivable (Click to select) Investment in Small Current assets Equity method income Dividend income Long term investment Account receivable Cash Inventories To record 80 of acquisition differential amortization and impairment of year 8 (ii) Determine the investment in Small at December 31, Year 8 (Omit $ sign in your response ) Investment in Small under equity method $", "question_description": "

Large Ltd. purchased 80% of Small Company on January 1, Year 6, for $660,000, when the statement of financial position for Small showed common shares of $490,000 and retained earnings of $190,000. On that date, the inventory of Small was undervalued by $51,000, and a patent with an estimated remaining life of five years was overvalued by $76,000.<\/p>

Small reported the following subsequent to January 1, Year 6:<\/p>
<\/td> Profit (Loss)<\/em><\/td> Dividends<\/em> <\/td> <\/tr>
Year 6<\/td> $<\/td> 116,000<\/td> <\/td> $<\/td> 34,000<\/td> <\/td> <\/tr>
Year 7<\/td> <\/td> (44,000<\/td> )<\/td> <\/td> 19,000<\/td> <\/td> <\/tr>
Year 8<\/td> <\/td> 99,000<\/td> <\/td> <\/td> 49,000<\/td> <\/td> <\/tr>
<\/td> <\/tr> <\/tbody> <\/table>

A test for goodwill impairment on December 31, Year 8, indicated a loss of $20,200 should be reported for Year 8 on the consolidated income statement. Large uses the cost method to account for its investment in Small and reported the following for Year 8 for its separate-entity statement of changes in equity:<\/p>
<\/td> <\/td> <\/td> <\/td> <\/tr>
Retained earnings, beginning<\/td> $<\/td> 590,000<\/td> <\/td> <\/tr>
Profit<\/td> <\/td> 290,000<\/td> <\/td> <\/tr>
Dividends<\/td> <\/td> (61,000<\/td> )<\/td> <\/tr>
Retained earnings, end<\/td> $<\/td> 819,000<\/td> <\/td> <\/tr>
<\/td> <\/tr> <\/tbody> <\/table>

Required:<\/strong><\/p>

(a)<\/strong> Prepare the cost method journal entries of Large for each year. (Omit $ sign in your response.)<\/strong><\/p>

Year 6<\/strong><\/p>
General Journal<\/td> Debit<\/td> Credit<\/td> <\/tr>
(Click to select) Investment in Small Equity method income Dividend income Current assets Goodwill Account receivable Cash Long-term investment<\/td> <\/td> <\/td> <\/tr>
(Click to select) Investment in Small Long-term investment Account receivable Current assets Dividend income Inventories Goodwill Cash<\/td> <\/td> <\/td> <\/tr>
To record the purchase of 80% of Small Company<\/td> <\/td> <\/td> <\/tr>
<\/td> <\/td> <\/td> <\/tr>
(Click to select) Long-term investment Investment in Small Dividend income Goodwill Cash Current assets Account receivable Inventories<\/td> <\/td> <\/td> <\/tr>
(Click to select) Current assets Goodwill Investment in Small Inventories Long-term investment Dividend income Account receivable Cash<\/td> <\/td> <\/td> <\/tr>
To record dividend received from Small Company<\/td> <\/td> <\/td> <\/tr>
<\/td> <\/tr> <\/tbody> <\/table>

Year 7<\/strong><\/p>
General Journal<\/td> Debit<\/td> Credit<\/td> <\/tr>
(Click to select) Cash Long-term investment Goodwill Current assets Account receivable Inventories Investment in Small Dividend income<\/td> <\/td> <\/td> <\/tr>
(Click to select) Dividend income Inventories Goodwill Long-term investment Current assets Investment in Small Account receivable Cash<\/td> <\/td> <\/td> <\/tr>
<\/td> <\/td> <\/td> <\/tr>
To record dividend received from Small Company<\/td> <\/td> <\/td> <\/tr>
<\/td> <\/tr> <\/tbody> <\/table>

Year 8<\/strong><\/p>
General Journal<\/td> Debit<\/td> Credit<\/td> <\/tr>
(Click to select) Goodwill Current assets Cash Long-term investment Dividend income Account receivable Investment in Small Inventories<\/td> <\/td> <\/td> <\/tr>
(Click to select) Inventories Current assets Cash Account receivable Dividend income Investment in Small Long-term investment Goodwill<\/td> <\/td> <\/td> <\/tr>
To record dividend received from Small Company<\/td> <\/td> <\/td> <\/tr>
<\/td> <\/tr> <\/tbody> <\/table>

(b)<\/strong> Compute the following on the consolidated financial statements for the year ended December 31, Year 8: (Omit $ sign in your response.)<\/strong><\/p>

(i)<\/strong> Goodwill<\/p>

Goodwill $<\/p>

(ii)<\/strong> Non-controlling interest on the statement of financial position<\/p>

Non-controlling interest $<\/p>

(iii)<\/strong> Retained earnings, beginning of year<\/p>

Retained earnings, beginning of year $<\/p>

(iv)<\/strong> Profit attributable to Larges shareholders<\/p>

Profit attributable to Larges shareholders $<\/p>

(v)<\/strong> Profit attributable to non-controlling interest<\/p>

Profit attributable to non-controlling interest $<\/p>

(c)<\/strong> Now assume that Large is a private entity, uses ASPE, and chooses to use the equity method to report its investment in Small.<\/p>

(i)<\/strong> Prepare Larges journal entries for each year related to its investment in Small. (Omit $ sign in your response.)<\/strong><\/p>

Year 6<\/strong><\/p>
General Journal<\/td> Debit<\/td> Credit<\/td> <\/tr>
(Click to select) Cash Investment in Small Account receivable Current assets Long-term investment Dividend income Goodwill Inventories<\/td> <\/td> <\/td> <\/tr>
(Click to select) Current assets Dividend income Long-term investment Cash Inventories Goodwill Account receivable Investment in Small<\/td> <\/td> <\/td> <\/tr>
To record the purchase of 80% of Small Company<\/td> <\/td> <\/td> <\/tr>
<\/td> <\/td> <\/td> <\/tr>
(Click to select) Investment in Small Dividend income Long-term investment Current assets Account receivable Cash Inventories Equity method income<\/td> <\/td> <\/td> <\/tr>
(Click to select) Long-term investment Current assets Goodwill Equity method income Dividend income Account receivable Investment in Small Inventories<\/td> <\/td> <\/td> <\/tr>
To record 80% of Small Company year 6 net income<\/td> <\/td> <\/td> <\/tr>
<\/td> <\/td> <\/td> <\/tr>
(Click to select) Inventories Account receivable Goodwill Cash Dividend income Investment in Small Long-term investment Current assets<\/td> <\/td> <\/td> <\/tr>
(Click to select) Current assets Account receivable Cash Investment in Small Long-term investment Dividend income Inventories Goodwill<\/td> <\/td> <\/td> <\/tr>
To record 80% of the dividend received from Small Company<\/td> <\/td> <\/td> <\/tr>
<\/td> <\/td> <\/td> <\/tr>
(Click to select) Goodwill Inventories Account receivable Investment in Small Current assets Equity method income Cash Long-term investment<\/td> <\/td> <\/td> <\/tr>
(Click to select) Investment in Small Current assets Dividend income Inventories Goodwill Equity method income Cash Long-term investment<\/td> <\/td> <\/td> <\/tr>
To record 80% of acquisition differential amortization and impairment of year 6<\/td> <\/tr>
<\/td> <\/tr> <\/tbody> <\/table>

Year 7<\/strong><\/p>
General Journal<\/td> Debit<\/td> Credit<\/td> <\/tr>
(Click to select) Equity method loss Investment in Small Account receivable Equity method income Cash Inventories Current assets Dividend income Long-term investment<\/td> <\/td> <\/td> <\/tr>
(Click to select) Long-term investment Inventories Dividend income Current assets Investment in Small Equity method income Account receivable Cash<\/td> <\/td> <\/td> <\/tr>
To record 80% of Small Company year 7 net loss<\/td> <\/td> <\/td> <\/tr>
<\/td> <\/td> <\/td> <\/tr>
(Click to select) Account receivable Inventories Dividend income Investment in Small Cash Equity method income Current assets Long-term investment<\/td> <\/td> <\/td> <\/tr>
(Click to select) Equity method income Cash Investment in Small Long-term investment Current assets Inventories Account receivable Dividend income<\/td> <\/td> <\/td> <\/tr>
To record 80% of the dividend received from Small Company<\/td> <\/td> <\/td> <\/tr>
<\/td> <\/td> <\/td> <\/tr>
(Click to select) Current assets Long-term investment Dividend income Investment in Small Cash Account receivable Equity method income Inventories<\/td> <\/td> <\/td> <\/tr>
(Click to select) Account receivable Investment in Small Goodwill Equity method income Long-term investment Current assets Cash Equity method loss Inventories<\/td> <\/td> <\/td> <\/tr>
To record 80% of acquisition differential amortization and impairment of year 7<\/td> <\/tr>
<\/td> <\/tr> <\/tbody> <\/table>

Year 8<\/strong><\/p>
General Journal<\/td> Debit<\/td> Credit<\/td> <\/tr>
(Click to select) Dividend income Inventories Equity method income Cash Long-term investment Account receivable Current assets Investment in Small<\/td> <\/td> <\/td> <\/tr>
(Click to select) Account receivable Investment in Small Long-term investment Cash Inventories Equity method income Current assets Dividend income<\/td> <\/td> <\/td> <\/tr>
To record 80% of Small Company year 8 net income<\/td> <\/td> <\/td> <\/tr>
<\/td> <\/td> <\/td> <\/tr>
(Click to select) Goodwill Dividend income Cash Investment in Small Long-term investment Account receivable Current assets Inventories<\/td> <\/td> <\/td> <\/tr>
(Click to select) Current assets Dividend income Long-term investment Account receivable Goodwill Cash Investment in Small Inventories<\/td> <\/td> <\/td> <\/tr>
To record 80% of the dividend received from Small Company<\/td> <\/td> <\/td> <\/tr>
<\/td> <\/td> <\/td> <\/tr>
(Click to select) Investment in Small Dividend income Current assets Equity method income Long-term investment Inventories Cash Account receivable<\/td> <\/td> <\/td> <\/tr>
(Click to select) Investment in Small Current assets Equity method income Dividend income Long-term investment Account receivable Cash Inventories<\/td> <\/td> <\/td> <\/tr>
To record 80% of acquisition differential amortization and impairment of year 8<\/td> <\/tr>
<\/td> <\/tr> <\/tbody> <\/table>

(ii)<\/strong> Determine the investment in Small at December 31, Year 8. (Omit $ sign in your response.)<\/strong><\/p>

Investment in Small under equity method $<\/p>", "transcribed_text": "", "related_book": { "title": null, "isbn": null, "edition": null, "authors": null, "cover_image": null, "uri": null, "see_more_uri": "" }, "free_related_book": { "isbn": "", "uri": "", "name": "", "edition": "" }, "question_posted": "2024-09-14 00:02:36", "see_more_questions_link": "\/study-help\/questions\/business-banking-2021-September-12", "step_by_step_answer": "The Answer is in the image, click to view ...", "students_also_viewed": [ { "url": "\/study-help\/industrial-organizational-psychology-understanding-the-workplace\/148-understand-the-symptoms-treated-and-the-side-effects-of-2007102", "description": "14.8 Understand the symptoms treated and the side effects of noninvasive brain stimulation procedures (TMS and ECT) and psychosurgery.", "stars": 0 }, { "url": "\/the-purpose-of-part-i-is-to-perform-preliminary-analytical", "description": "The purpose of Part I is to perform preliminary analytical procedures as part of the audit planning process. You have been asked to focus your attention on two purposes of analytical procedures:...", "stars": 3 }, { "url": "\/study-help\/questions\/large-ltd-purchased-80-of-small-company-on-january-1-10718894", "description": "Large Ltd. purchased 80% of Small Company on January 1, Year 6, for $660,000, when the statement of financial position for Small showed common shares of $490,000 and retained earnings of $190,000. On...", "stars": 3 }, { "url": "\/study-help\/questions\/the-following-is-selected-financial-information-for-osmond-dental-laboratories-7483595", "description": "The following is selected financial information for Osmond Dental Laboratories for 2021 and 2022: Retained earnings, January 1 Net income Dividends Common stock 2021 2022 $52,000 31,000 49,000 12,000...", "stars": 3 }, { "url": "\/study-help\/questions\/the-tension-between-my-mother-and-me-rapidly-increased-once-1002405", "description": "The tension between my mother and me rapidly increased once I moved home from college as she gave me little to no privacy. I was mature, had a full-time job, and wasn't the same as before I left four...", "stars": 3 }, { "url": "\/study-help\/questions\/the-table-below-presents-the-tax-revenue-and-spending-for-4767920", "description": "The table below presents the tax revenue and spending for the government over five years. a. Under the \"Budget Amount\" column calculate the annual budget outcome. Instructions: Enter your answer as a...", "stars": 3 }, { "url": "\/study-help\/questions\/according-to-valor-how-can-the-framework-of-virtue-ethics-1002445", "description": "According to valor how can the framework of virtue ethics the ride inside in the hell robot human interactions condition the social and emotional character of humans especially patients And caregivers", "stars": 3 }, { "url": "\/study-help\/questions\/extract-b-lines-2021-states-that-all-vehicle-owners-should-1037213", "description": "Extract B (lines 20-21) states that 'all vehicle owners should be forced to pay the full costs of their driving. This would incentivise people to consider using public transport, cycling or walking....", "stars": 3 }, { "url": "\/study-help\/questions\/betsy-really-likes-working-at-thompson-trucking-she-likes-how-1096866", "description": "Betsy really likes working at Thompson Trucking. She likes how things are in the office and can't figure out why Rachel is always getting so upset about the turnover rate of foreign workers. Betsy...", "stars": 3 } ], "next_back_navigation": { "previous": "\/study-help\/questions\/there-are-many-products-that-is-very-small-and-produced-10718893", "next": "\/study-help\/questions\/what-are-the-evaluation-metrics-that-are-potentially-used-by-10718895" }, "breadcrumbs": [ { "name": "Study help", "link": "https:\/\/www.solutioninn.com\/study-help\/questions-and-answers" }, { "name": "Business", "link": "https:\/\/www.solutioninn.com\/study-help\/questions-and-answers\/business" }, { "name": "Accounting", "link": "https:\/\/www.solutioninn.com\/study-help\/questions\/business-accounting" }, { "name": "Large Ltd. purchased 80% of Small Company on January 1, Year 6,", "link": "https:\/\/www.solutioninn.com\/study-help\/questions\/large-ltd-purchased-80-of-small-company-on-january-1-10718894" } ], "skill_details": { "skill_id": "9", "skill_name": "Accounting", "parent_id": "1" } }1" } }