P5-35 Comprehensive Problem: Differential Apportionment LO 5-2
Pillow Corporation acquired 80 percent ownership of Sheet Company on January 1, 20X7, for $173,000. At that date, the fair value of the noncontrolling interest was $43,250. The trial balances for the two companies on December 31, 20X7, included the following amounts:
PS-35 Comprehensive Problem: Diflerential Apportionment LO 5-2 Pillow Corporation acquired 80 percent ownership of Sheet Company on January 1, 20X7, for $173,000. At that date, the fair value of the noncontrolling interest was $43,250. The trial balances for the two companies on December 31, 20X7 included the following amounts: tem Accounts Receivable Buildings & Equipment Investment in Sheet Company Gost of Goods Sold Depreciason Expese Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Mortgages Payable Retained Earnings ncome from Sheet Company Additional Information 1. On January 1, 20X7, Sheet reported net assets with a book value of $150,000 and a fair value of $191,250. Accumulated depreciation on Buildings and Equipment was $60,000 on the acquisition date. 2. Sheet's depreciable assets had an estimated economic life of 11 years on the date of combination. Goodwill of $25,000 was recorded at the acquisition. 3. Pillow used the equity method in accounting for its investment in Sheet. 4. Detailed analysis of receivables and payables showed that Sheet owed Pillow $16,000 on December 31,20X7 Required: a. Prepare all jounal entries recorded by Pillow with regard to its investment in Sheet during 20X7. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Journal entry worksheet Record the initial investment in Sheet Company Journal entry worksheet Record Pillow Corporation's 80% share of Sheet Company's 20X7 income. Note: Enter debits before credits. Debit Event General Journal Credit Clear entry View general journal Record entry Journal entry worksheet Record Pillow Corporation's 80% share of Sheet Company's 20x7 dividend. Note: Enter debits before credits. Credit Event General Journal Debit Record entry Clear entry View general journal Journal entry worksheet Record the amortization of the excess acquisition price. Note: Enter debits before credits Debit Credit Event General Journal View general journal Record entry Clear entry b. Prepare all consolidation 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.) Consolidation Worksheet Entries Record the basic consolidation entry. Note: Enter debits before credits Event Accounts Debit Credit Consolidation Worksheet Entries Record the amortized excess value reclassification entry. Note: Enter debits before credits Event Credit Accounts Debit 2 Clear entry Consolidation Worksheet Entries Record the excess value (differential) reclassification entry. Note: Enter debits before credits. Event Accounts Debit Credit Consolidation Worksheet Entries Record the entry to eliminate the intercompany accounts. Note: Enter debits before credits. Event Accounts Debit Credit Clear entry view consolidation entries Consolidation Worksheet Entries Record the optional accumulated depreciation consolidation entry Note: Enter debits before credits Event Accounts Credit Debit Record entry Clear entry iew cons c. Prepare a three-part consolidation worksheet as of December 31, 20X7 (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.) CORPORATION AND Worksheet for Consolidated Financial Statements December 31, 20X7 Consolidation Entries Pillow Sheet Co. DR CR Income Statement Sales Less: CoGS Less: Depreciation expense Less: Other expenses Income from Sheet Company Consolidated net income NCI in net income Controlling Interest in Net Income Statement of Retained Earnings Beginning balance Net income Less: Dividends declared Ending Balance Balance Sheet Accounts receivable Land Buildings and equipment Investment in Sheet Company Goodwill Total Assets Accounts payable Morigage payable Common stock Retained eamings NCI in NA of Sheet Company Total Liabilities&Equity PS-35 Comprehensive Problem: Diflerential Apportionment LO 5-2 Pillow Corporation acquired 80 percent ownership of Sheet Company on January 1, 20X7, for $173,000. At that date, the fair value of the noncontrolling interest was $43,250. The trial balances for the two companies on December 31, 20X7 included the following amounts: tem Accounts Receivable Buildings & Equipment Investment in Sheet Company Gost of Goods Sold Depreciason Expese Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Mortgages Payable Retained Earnings ncome from Sheet Company Additional Information 1. On January 1, 20X7, Sheet reported net assets with a book value of $150,000 and a fair value of $191,250. Accumulated depreciation on Buildings and Equipment was $60,000 on the acquisition date. 2. Sheet's depreciable assets had an estimated economic life of 11 years on the date of combination. Goodwill of $25,000 was recorded at the acquisition. 3. Pillow used the equity method in accounting for its investment in Sheet. 4. Detailed analysis of receivables and payables showed that Sheet owed Pillow $16,000 on December 31,20X7 Required: a. Prepare all jounal entries recorded by Pillow with regard to its investment in Sheet during 20X7. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Journal entry worksheet Record the initial investment in Sheet Company Journal entry worksheet Record Pillow Corporation's 80% share of Sheet Company's 20X7 income. Note: Enter debits before credits. Debit Event General Journal Credit Clear entry View general journal Record entry Journal entry worksheet Record Pillow Corporation's 80% share of Sheet Company's 20x7 dividend. Note: Enter debits before credits. Credit Event General Journal Debit Record entry Clear entry View general journal Journal entry worksheet Record the amortization of the excess acquisition price. Note: Enter debits before credits Debit Credit Event General Journal View general journal Record entry Clear entry b. Prepare all consolidation 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.) Consolidation Worksheet Entries Record the basic consolidation entry. Note: Enter debits before credits Event Accounts Debit Credit Consolidation Worksheet Entries Record the amortized excess value reclassification entry. Note: Enter debits before credits Event Credit Accounts Debit 2 Clear entry Consolidation Worksheet Entries Record the excess value (differential) reclassification entry. Note: Enter debits before credits. Event Accounts Debit Credit Consolidation Worksheet Entries Record the entry to eliminate the intercompany accounts. Note: Enter debits before credits. Event Accounts Debit Credit Clear entry view consolidation entries Consolidation Worksheet Entries Record the optional accumulated depreciation consolidation entry Note: Enter debits before credits Event Accounts Credit Debit Record entry Clear entry iew cons c. Prepare a three-part consolidation worksheet as of December 31, 20X7 (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.) CORPORATION AND Worksheet for Consolidated Financial Statements December 31, 20X7 Consolidation Entries Pillow Sheet Co. DR CR Income Statement Sales Less: CoGS Less: Depreciation expense Less: Other expenses Income from Sheet Company Consolidated net income NCI in net income Controlling Interest in Net Income Statement of Retained Earnings Beginning balance Net income Less: Dividends declared Ending Balance Balance Sheet Accounts receivable Land Buildings and equipment Investment in Sheet Company Goodwill Total Assets Accounts payable Morigage payable Common stock Retained eamings NCI in NA of Sheet Company Total Liabilities&Equity
