No Event General Journal Debit Credit A 1 Investment in Sword Company 200,000 Cash 200,000 B 2 Investment in Sword Company 74,000 Income from Sword Company 74.000 C 3 Cash 26,000 Investment in Sword Company 26,000 D 4 Income from Sword Company 3,000 Investment in Sword Company 3,000Prince Corporation acquired 100 percent of Sword Company on January 1, 20X7, for $200,000. The trial balances for the two companies on December 31, 20X7, included the following amounts: Prince Corporation Sword Company Item Debit Credit Debit Credit Cash $ 89,060 $ 32,000 Accounts Receivable 55,000 60,080 Inventory 173,000 117,000 Land 87,060 27,000 Buildings and Equipment 499,060 167,000 Investment in Sword Company 245,000 Cost of Goods Sold 499,000 252,000 Depreciation Expense 20,000 10,000 Other Expenses 71,000 71,000 Dividends Declared 51,060 26,000 Accumulated Depreciation $ 145,000 $ 50,060 Accounts Payable 57,000 23,000 Mortgages Payable 200,080 141,090 Common Stock 286,000 48,000 Retained Earnings 333,000 93,000 Sales 697,000 407,000 Income from Sword Company 71,080 $1,789,000 $1,789,000 $762,000 $762,090 Additional Information 1. On January 1, 20X7, Sword reported net assets with a book value of $141,000. A total of $26,000 of the acquisition price is applied to goodwill, which was not impaired in 20X7. 2. Sword's depreciable assets had an estimated economic life of 11 years on the date of combination. The difference between fair value and book value of tangible assets is related entirely to buildings and equipment. 3. Prince used the equity-method in accounting for its investment in Sword. 4. Detailed analysis of receivables and payables showed that Sword owed Prince $18,000 on December 31, 20X7. Required: a. Prepare all journal entries recorded by Prince with regard to its investment in Sword during 20X7. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)b. Prepare all consolidating entries needed to prepare a full set of consolidated financial statements for 20X7. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No Event Accounts Debit Credit A 1 Common stock 48.000 Retained earnings 93,000 Income from Sword Company 74,000 Dividends declared 26,000 Investment in Sword Company 189,000 B 2 Depreciation expense 3,000 Income from Sword Company 3,000 C 3 Buildings and equipment 33,000 Goodwill 26,000 Accumulated depreciation 3,000 Investment in Sword Company 56,000 D 4 Accounts payable 18,000 Accounts receivable 18,000 E 5 Accumulated depreciation O 40.000 Buildings and equipment 40,000
