Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 1, 2016, Parent Company acquired 100% of the common stock of Subsidiary Company for $750,000. On this date Subsidiary had total owners' equity

  1. On January 1, 2016, Parent Company acquired 100% of the common stock of Subsidiary Company for $750,000. On this date Subsidiary had total owners' equity of $540,000.

Any excess of cost over book value is attributable to land, undervalued $10,000, and to goodwill.

During 2016 and 2017, Parent has appropriately accounted for its investment in Subsidiary using the simple equity method.

On January 1, 2017, Parent held merchandise acquired from Subsidiary for $10,000. During 2017, Subsidiary sold merchandise to Parent for $100,000, of which $20,000 is held by Parent on December 31, 2017. Subsidiary's usual gross profit on affiliated sales is 40%.

On December 31, 2017, Parent still owes Subsidiary $20,000 for merchandise acquired in December.

On January 1, 2017, Parent sold to Subsidiary some equipment with a cost of $50,000 and a book value of $20,000. The sales price was $40,000. Subsidiary is depreciating the equipment over a five-year life, assuming no salvage value and using the straight-line method.

Required:

Prepare the worksheet eliminations (journal entry form) that would be made on the 2017 consolidated worksheet as a result of:

1) the intercompany sale of inventory

2) the intercompany sale of equipment

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

Cost Accounting A Managerial Emphasis

Authors: Charles T. Horngren

3rd Edition

0131800345, 978-0131800342

More Books

Students also viewed these Accounting questions

Question

Create a decision tree for Problem 12.

Answered: 1 week ago

Question

=+can you write alternative statements that are better?

Answered: 1 week ago