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On January 1, 20X9, Zigma Company acquired 100 percent of Standard Company's common shares at underlying book value. Zigma uses the equity method in accounting
On January 1, 20X9, Zigma Company acquired 100 percent of Standard Company's common shares at underlying book value. Zigma 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: Mostly need help on part B
On January 1, 20X9, Zigma Company acquired 100 percent of Standard Company's common shares at underlying book value. Zigma 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: Current Assets Depreciable Assets Investment in Standard Co. Other Expenses Depreciation Expense Dividends Declared Accumulated Depreciation Current Liabilities Long-Term Debt Common Stock Retained Earnings Sales Income from Standard Co. Zigma Co Standard Co. Debit Credit Debit Credit $238,000 $95,000 300,000 170,000 100,000 90,000 70,000 30,000 17,000 32,000 10,000 $120,000 $ 85,000 50,000 30,000 120,000 50,000 100,000 50,000 175,000 35,000 200,000 112,000 25,000 $790,000 $790,000 $362,000 $362,000 Total Required: a. Prepare the journal entries on Zigma's books for the acquisition of Standard on January 1,20x9 as well as any normal equity method entry (ies) related to the investment in Standard Company during 20x9. b. Prepare the consolidation entries needed as of December 31, 20X9, to complete a consolidation worksheet. c. Prepare a three-part consolidation worksheet as of December 31, 20X9. a. Equity Method Entries on Zigma Co.'s Books: Record the initial investment in Standard Co. Record Zigma Co.'s 100% share of Standard Co.'s 20X9 income Record Zigma Co.'s 100% share of Standard Co.'s 20X9 dividend b. Elimination Entries: To reverse equity method entries made during the year and return Investment account to the beginning of year balance To eliminate the Investment account c. Consolidation Worksheet: Zigma Co. Standard Co. Elimination Entries DR CR Consolidated Income Statement Sales Less: Depreciation Expense Less: Other Expenses Income from Standard Co. Net Income 200,000 (90,000) (30,000) 25,000 105,000 112,000 (70,000) (17,000) 25,000 175,000 35,000 Statement of Retained Earnings Beginning Balance Net Income Less: Dividends Declared Ending Balance (32,000) (10,000) Balance Sheet Current Assets Depreciable Assets Less: Accumulated Depreciation 238,000 300,000 95,000 170,000 (120,000) (85,000) Investment in Standard Co. Total Assets 100,000 518,000 180,000 Current Liabilities Long-Term Debt Common Stock Retained Earnings Total Liabilities & Equity 50,000 120,000 100,000 30,000 50,000 50,000 518,000 180,000Step by Step Solution
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