Question
On January 1, 20X9, Peery Company acquired 100 percent of Standard Company's common shares at underlying book value. Peery uses the equity method in accounting
On January 1, 20X9, Peery Company acquired 100 percent of Standard Company's common shares at underlying book value. Peery uses the equity method in accounting for its ownership of Standard. On December 31, 20X9, the trial balances of the two companies are as follows:
Peery Co. Standard Co.
Item Debit
Credit
Debit Credit
Current Assets$ 238,000
$ 95,000
Depreciable Assets
300,000
170,000
Investment in Standard Co.
100,000
Other
Expenses
90,000
70,000
Depreciation Expense
30,000
17,000
Dividends Declared
32,000
10,000
Accumulated Depreciation
$
120,000
$
85,000
Current
Liabilities
50,000
30,000
Long-Term Debt
120,000
50,000
Common
Stock
100,000
50,000
Retained
Earnings
175,000
35,000
Sales
200,000
112,000
Income from Standard Co.
25,000
$ 790,000$ 790,000$ 362,000$ 362,000
Required:
1-Prepare the journal entry to record the dividends received during year one .
2-Prepare the journal entry to record the effect of income from subsidiary on the parent's investments.
3-Prepare the consolidation entry necessary to prepare the worksheet at the end of year one.
4-Prepare a schedule to show your book value calculations.
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Financial And Managerial Accounting
Authors: Jan R. Williams, Joseph V. Carcello, Mark S. Bettner, Sue Haka, Susan F. Haka
14th International Edition
0071101217, 9780071101219
