Prince Corporation acquired 100 percent of Sword Company on January 1, 20X7, for $183,000. The trial balances for the two companies on December 31, 20X7, included the following amounts: Prince Corporation Sword Company Item Debit Credit Debit Credit Cash $ 88,000 $ 28,000 Accounts Receivable 69,000 74,000 Inventory 178,000 117,000 Land 86,000 23,000 Buildings and Equipment 491,000 163,000 Investment in Sword Company 257,000 Cost of Goods Sold 491,000 251,000 Depreciation Expense 24,000 14,000 Other Expenses 56,000 56,000 Dividends Declared 52,000 21,000 Accumulated Depreciation $ 149,000 $ 70,000 Accounts Payable 58,000 26,000 Mortgages Payable 182,000 103,000 Common Stock 288,000 45,000 Retained Earnings 338,000 84,000 Sales 682,000 419,000 Income from Sword Company 95,000 $1,792,000 $1,792,000 $747,000 $747,000 Additional Information 1. On January 1, 20X7, Sword reported net assets with a book value of $129,000. A total of $21,000 of the acquisition price is applied to goodwill, which was not impaired in 20X7. 2. Sword's depreciable assets had an estimated economic life of 11 years on the date of combination. The difference between fair value and book value of tangible assets is related entirely to buildings and equipment. 3. Prince used the equity-method in accounting for its investment in Sword. 4. Detailed analysis of receivables and payables showed that Sword owed Prince $21,000 on December 31, 20x7. Required: a. Prepare all journal entries recorded by Prince with regard to its investment in Sword during 20x7. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list A Record the initial investment in Sword Co. B Record Prince Corp's share of Sword Co.'s 20x7 income. C Record Prince Corp's share of Sword Co.'s 20x7 dividend. D Record the amortization of the excess acquisition price. Credit b. Prepare all consolidating 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.) view transaction list A Record the basic consolidation entry. > B Record the amortized excess value reclassification entry. C Record the excess value (differential) reclassification entry. D Record the entry to eliminate the intercompany accounts. E Record the optional accumulated depreciation consolidation entry. Credit 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.) PRINCE CORPORATION AND SUBSIDIARY Consolidated Financial Statements Worksheet December 31, 20X7 Consolidation Entries DR CR Prince Corp Sword Co Consolidated Income Statement Sales Less: COGS Less: Depreciation expense Less: Other expenses Income from Sword Co. Net Income Statement of Retained Earnings Beginning balance Net income Less: Dividends declared Ending Balance Balance Sheet Assets Cash Accounts receivable Inventory Land Buildings & equipment Less: Accumulated depreciation Investment in Sword Co. Goodwill Total Assets Liabilities & Equity Accounts payable Mortgages payable Common stock Retained earnings Total Liabilities & Equity
