Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Liabilities and Stockholders' Equity: Current Liabilities Long-term Liabilities Common Stock APIC Retained Earnings begin{tabular}{rr} $620,500 & $46,000 703,500 & 250,000 402,000 & 130,000

image text in transcribed
image text in transcribed
image text in transcribed
Liabilities and Stockholders' Equity: Current Liabilities Long-term Liabilities Common Stock APIC Retained Earnings \begin{tabular}{rr} $620,500 & $46,000 \\ 703,500 & 250,000 \\ 402,000 & 130,000 \\ 1,588,500 & 246,000 \\ 3,011,320 & 468,500 \\ \hline$6,325,820 & $1,140,500 \\ \hline \end{tabular} a. How was the income from subsidiary calculated by Smith Company? (hint: it isn't Davis's income so there must be some adjustments) b. Do a proof of the investment account at 12/31/21 and 12/31/22 (using our formula (BV of equity + remaining AAP)). I am looking for you to tell me what comprises the balance in these accounts. Note: You do not have the beginning of the year balances, but you have all the information you would need to calculate them c. Prepare the entries required under the equity method on Smith's pre-consolidation books for 2022 . This means make the entries the parent company would make on its separate company books d. Prepare the consolidation entries for 2022. e. Prepare the consolidation spreadsheet. What is provided in the Excel document is the same as the information provided above. Add or delete rows if necessary to accommodate your solution/consolidation entries. Smith Company acquired 100% of Davis Company's common stock for $1,200,000 in cash on Jan. 1, 2018. At that date, Davis's $800,000 of net assets (aka book value of equity) were fairly stated, except a building that was overvalued by $80,000 (estimated useful life of 8 years, straight-line) and a $125,000 undervalued piece of equipment (estimated useful life of 5 years, straight-line). Davis also had an unrecorded patent of 100,000 (useful life of 10 years, straightline). Smith Company accounts for its investment in Davis Company using the equity method. The following financial statements are reported at December 31, 2022

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Guide To Conducting Internal Audits Of Your Management Systems

Authors: Martin Pykett

1st Edition

B099C3GPMH, 979-8538997749

More Books

Students also viewed these Accounting questions