Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 1, 2019, Monica Company acquired 80 percent of Young Company's outstanding common stock for $792,000. The fair value of the noncontrolling interest at

image text in transcribedimage text in transcribed

On January 1, 2019, Monica Company acquired 80 percent of Young Company's outstanding common stock for $792,000. The fair value of the noncontrolling interest at the acquisition date was $198,000. Young reported stockholders' equity accounts on that date as follows: Common stock-$10 par value Additional paid-in capital Retained earnings $ 200,000 90,000 510,000 In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building (with a five-year remaining life) by $90,000. Any remaining excess acquisition-date fair value was allocated to a franchise agreement to be amortized over 10 years. During the subsequent years, Young sold Monica inventory at a 20 percent gross profit rate. Monica consistently resold this merchandise in the year of acquisition or in the period immediately following. Transfers for the three years after this business combination was created amounted to the following: Year 2019 2020 2021 Transfer Price $ 50,000 70,000 80,000 Inventory Remaining at Year-End (at transfer price) $ 20,000 22,000 28,000 In addition, Monica sold Young several pieces of fully depreciated equipment on January 1, 2020, for $46,000. The equipment had originally cost Monica $70,000. Young plans to depreciate these assets over a 5-year period. In 2021, Young earns a net income of $240,000 and declares and pays $75,000 in cash dividends. These figures increase the subsidiary's Retained Earnings to a $840,000 balance at the end of 2021. Monica employs the equity method of accounting. Hence, it reports $177,840 investment income for 2021 with an Investment account balance of $956,720. Prepare the worksheet entries required for the consolidation of Monica Company and Young Company. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) view transaction list Consolidation Worksheet Entries 1 2 3 4 5 6 7 8 11 > Prepare Entry *G Note: Enter debits before credits. Accounts Debit Credit Transaction 1 Record entry Clear entry view consolidation entries

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

Front Office Operations And Night Audit Workbook

Authors: Patrick J. Moreo, Gail Sammons, Jim Dougan, James Dougan

1st Edition

0133987698, 978-0133987690

More Books

Students also viewed these Accounting questions

Question

Discuss consumer-driven health plans.

Answered: 1 week ago