Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Paper Company acquired 80 percent of Scissor Companys outstanding common stock for $296,000 on January 1, 20X8, when the book value of Scissors net assets

Paper Company acquired 80 percent of Scissor Companys outstanding common stock for $296,000 on January 1, 20X8, when the book value of Scissors net assets was equal to $370,000. Paper uses the equity method to account for investments. Trial balance data for Paper and Scissor as of December 31, 20X8, are as follows:

Paper Company Scissor Company
Debit Credit Debit Credit
Cash $ 191,000 $ 46,000
Accounts Receivable 140,000 60,000
Inventory 190,000 120,000
Investment in Scissor Company 350,400 0
Land 250,000 125,000
Buildings and Equipment 875,000 250,000
Cost of Goods Sold 250,000 155,000
Depreciation Expense 65,000 12,000
Selling & Administrative Expense 280,000 50,000
Dividends Declared 80,000 25,000
Accumulated Depreciation 565,000 36,000
Accounts Payable 77,000 27,000
Bonds Payable 250,000 100,000
Common Stock 625,000 250,000
Retained Earnings 280,000 120,000
Sales 800,000 310,000
Income from Scissor Company 74,400 0
Total $ 2,671,400 $ 2,671,400 $ 843,000 $ 843,000

Required: a. Prepare any equity method entry(ies) related to the investment in Scissor Company during 20X8.

b. Prepare a consolidation worksheet for 20X8. Assume the company prepares the optional Accumulated Depreciation Consolidation Entry.

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

Students also viewed these Accounting questions