Question 2 (10 points) Saved Priya Corporation acquired 100 percent of Sheldon Company stock on January...

Transcribed Image Text:

Question 2 (10 points) Saved Priya Corporation acquired 100 percent of Sheldon Company stock on January 1, 2021 for $1,160,600 cash. Following are pre-closing trial balance amounts for Priya Corporation and Sheldon Company as of December 31, 2021: COMPANY PRIYA Debit CORPORATION Credit SHELDON Debit Credit Cash Accounts Receivable Inventory Investment in Sheldon Corp. Buildings $ 540,800 $ 304,700 294,000 197,000 473,000 210,000 1,373,400 625,000 292,500 Land 807,000 291,000 Equipment Cost of Goods Sold Depreciation Expense, Building 315,000 345,000 342,000 211,000 58,600 18,600 Depreciation Expense, Equipment 41,300 24,700 Selling & Administrative Expense 159,000 119,600 Dividends Declared Accumulated Depreciation, Bldg 80,000 50,000 $ 243,400 $ 74,400 Accumulated Depreciation, Equip 156,200 98,800 Accounts Payable Bonds Payable Common Stock ($1 par) 178,000 174,500 515,000 108,400 659,000 290,000 Additional Paid In Capital 1,525,800 375,000 Retained Earnings (01/01/2021) 788,500 265,000 Sales 780,400 678,000 Income from Sheldon Corp. $ 262,800 5,109,100 $ 5,109,100 $ 2,064,100 $ 2,064,100 Additional Information: 1. On January 1, 2021 the fair market value of Sheldon's assets equaled their book value with the exception of: Inventory - was overvalued by $5,400 (all this inventory was sold during 2021). Building - was undervalued by $94,000 (remaining useful life was estimated to be 4 years). Land-was by undervalued $47,000. Equipment - was overvalued by $42,000 (remaining useful life was estimated to be 10 years). The new Goodwill from the acquisition was impaired by $27,400 at year-end. 2. Priya Corporation uses the (full) equity method to account for its Investment in Sheldon Company. 3. The general ledger numbers given above (HINT: those in boldface) include the effects of the JOURNAL ENTRIES that were recorded by Priya at the acquisition date and during 2021 to account for its investment in Sheldon Company. These boldface figures should be used a check figures in your solution. Required: Recreate the JOURNAL ENTRIES recorded by Priya to account for its investment in Sheldon Company at January 1, 2021 and during 2021. (10 POINTS TOTAL) NOTE: BE SURE TO TYPE A SIMPLE NUMBER WITH NO COMMAS OR DOLLAR SIGNS. FOR EXAMPLE, TYPE 1000 INSTEAD OF $1,000. Question 2 (10 points) Saved Priya Corporation acquired 100 percent of Sheldon Company stock on January 1, 2021 for $1,160,600 cash. Following are pre-closing trial balance amounts for Priya Corporation and Sheldon Company as of December 31, 2021: COMPANY PRIYA Debit CORPORATION Credit SHELDON Debit Credit Cash Accounts Receivable Inventory Investment in Sheldon Corp. Buildings $ 540,800 $ 304,700 294,000 197,000 473,000 210,000 1,373,400 625,000 292,500 Land 807,000 291,000 Equipment Cost of Goods Sold Depreciation Expense, Building 315,000 345,000 342,000 211,000 58,600 18,600 Depreciation Expense, Equipment 41,300 24,700 Selling & Administrative Expense 159,000 119,600 Dividends Declared Accumulated Depreciation, Bldg 80,000 50,000 $ 243,400 $ 74,400 Accumulated Depreciation, Equip 156,200 98,800 Accounts Payable Bonds Payable Common Stock ($1 par) 178,000 174,500 515,000 108,400 659,000 290,000 Additional Paid In Capital 1,525,800 375,000 Retained Earnings (01/01/2021) 788,500 265,000 Sales 780,400 678,000 Income from Sheldon Corp. $ 262,800 5,109,100 $ 5,109,100 $ 2,064,100 $ 2,064,100 Additional Information: 1. On January 1, 2021 the fair market value of Sheldon's assets equaled their book value with the exception of: Inventory - was overvalued by $5,400 (all this inventory was sold during 2021). Building - was undervalued by $94,000 (remaining useful life was estimated to be 4 years). Land-was by undervalued $47,000. Equipment - was overvalued by $42,000 (remaining useful life was estimated to be 10 years). The new Goodwill from the acquisition was impaired by $27,400 at year-end. 2. Priya Corporation uses the (full) equity method to account for its Investment in Sheldon Company. 3. The general ledger numbers given above (HINT: those in boldface) include the effects of the JOURNAL ENTRIES that were recorded by Priya at the acquisition date and during 2021 to account for its investment in Sheldon Company. These boldface figures should be used a check figures in your solution. Required: Recreate the JOURNAL ENTRIES recorded by Priya to account for its investment in Sheldon Company at January 1, 2021 and during 2021. (10 POINTS TOTAL) NOTE: BE SURE TO TYPE A SIMPLE NUMBER WITH NO COMMAS OR DOLLAR SIGNS. FOR EXAMPLE, TYPE 1000 INSTEAD OF $1,000.