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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 | |||||||||
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 |
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