The balance sheets of the Polo Corporation and the Solo Company on Janaury 1. 20x1 together with the current fair values of Solo's identifiable net assets are shown below: Polo Corporation & Solo Company Separate Balance Sheets January 1, 20X1 Solo Company Polo Carrying Current Corporation Amounts Amounts Cash $ 2,800,000 $ 621,486 $ 621,486 Accounts Receivable (net). 3,200,000 1,785,491 1,785,491 Inventory 6,000,000 4,770,490 5,200,490 Land. 18,000,000 7,000,000 8,000,000 Building 40,000,000 22,000,000 24,000,000 Machinery 10,000,000 2,496,996 3,600,000 Patent 500,000 600,000 Total Assets $80,000,000 $39,174.463 Liabilities and Stockholders Equity Current Liabilities $2,900,000 $1,428,000 $1,428,000 17,100,000 Long Term Note Payable Bonds Payable (See note) Premium on Bonds Payable 20,000,000 21,346,463 1,346,463 Common Stock Sio Par 20,000,000 Common Stock 52 Par 2,000,000 Paid in Capital in Excess of Pa 12.000.000 6,000,000 Retained Earnings 28,000,000 8,400,000 Total Liabilities and fitocholders Equity 580,000.000 $39,174,463 Note-the Bond is a 10% semiannual note payable in 5 years. It was issued on January 1, 20x0. On January 1, 20x1 Polo acquired all of Solo's outstanding common stock by insuing 1,500,000 shares of its common stock when the market price was $16. Out of pocket costs paid by Polo were as follow Legal fees for registration of the stock Finders fees SEC registration fees Accountants fees (half for registration, balance for consultation) $9.000 14,000 20,000 16,000 The building has an additional useful life of 40 years, there was no salvage value estimated, and the company uses the straight-line method of depreciation. The machinery has an additional useful life of 6 years, the salvage value is estimated to be $2,196, and the company uses the sum of the years digits depreciation method. The patent has an additional life of 10 years. Both companies use FIFO perpetual for accounting for inventories. Consider depreciation and amortization as operating expenses. The year of 20XI: The Solo Company had a very bad year and they reported a loss of $3,000,000 Even though it was a year with a loss the Company manages to declare and pay a dividend of 50.10 per share. The Solo Company records dividends through a dividends account A calculation showed that goodwill was impaired by $500,000 Solo sold 2,000,000 units of merchandise costing 4,000,000 to Polo for $4,600,000. Cash was paid. Polo sold 1,500,000 of the 2,000,000 units purchased from Solo to an outside customer. The year of 20X2: On January 1 Polo realized that Solo did not disclose the market rate of interest on the bond. They did not even know what it was. One of our bright accountanta figured it out. When they found out the rate they bought the bonds that very day at a market rate of 4% Under the management of Polo, Solo had a good year and reported a profit of $6,000,000 Solo declared and paid a dividend of 50,70 per share. Solo sold 2,400,000 units of merchandise costing $5,040,000 to Polo for $6,000,000, Cash was not paid yet. Polo sold 2,700,000 units purchased from Solo to an outside customer The year of 20X2: Solo continges to be very profitable. This year they reported a profit of $10,000,000 Solo declared and paid a dividend of 51 per share. Polo is thrilled! On January 1 Solo old land and a building to Polo at a price of $12,000,000. The book value on Solos' books is $11,000,000. It was agreed that the fair value of the total Solo properties at January 1, 20XI would be used as an aid to record this entry. The remaining life of the building is 40 years with no salvare. While Solo uses straight-line method of depreciation Polo decided to use double declining balance. The building cont Solo 59,750,000 10 years ato Sold 3,000,000 units of merchandise costing $6,000,000 to Polo for $7.800,000. Cash was paid. The entire isentory sold to Polo from Solo was sold to outside customers Required: Prepare the following journal entries in good form. Round off all numbers to the searest whole dollar Each entry has a stated point value. () at the end of the entry means it is worth 5 points Number each entry. If there are two entries then make one A and the other B. 1. Record the out of pocket costs (2) 2. Record the investment on the books of Polo as of 1/1/20x1. (2) Prepare the elimination entry as of 1/1/20X1. (5) 3. 4. Record Solo's loss on the books of Polo as of 1231 20X1. (2) 5. 6. Record the adjustment to the loss on the books of Polo as of 12/3120X1. (2) Record the sale of inventory to Polo on the books of Solo for 20X1. (2) Record the purchase of inventory from Solo on the books of Polo for 20X1. (1) 7. Record the accrued interest expense on the books of Solo for 20X1. (1) 9. 10 11 I 12 13 14 15. Record the dividend on the books of Polo for 20X1. (1) Record the dividend on the books of Solo for 20X1. (1) Prepare the elimination entry as of 1231 20X1 (9 Prepare the elimination entry for the sales to Solo as of 123120X1. (9) Prepare the reclass entry for the purchase of the boods) Record Selo profit on the books of Polo w of 12/31 2032. (2) Record the adjustment to the profit on the books of Polo w of 12/31/2012 (3) Prepare the elimination entry as of 1231 2032. (10) Prepare the elimination entry for the sales to Solo as of 1231 2002 (3) Prepare the eliminaties entry for the beads as of 12/31/20X2 (10) Record the sale of the land and the buildings on the books of Seo (3) Record the purchase of the land and the building on the books of Polo (3) Record Solo's profit on the books or Male of 123120X3) 16 17 18 19 20 Recordement to the profit on the books of Polo as of 12:31 2003) 23 Prepare the elimination entry as of 12/31/20X2. (10) 24. Prepare the elimination entry for the sales to Solo as of 1231 20X3. (5) 25 Prepare the elimination entry for the sales of the land and the building as of 12/31 20X3. (10) 26. Prepare the elimination entry for the bond as of 12/31/20X3.) I The balance sheets of the Polo Corporation and the Solo Company on Janaury 1. 20x1 together with the current fair values of Solo's identifiable net assets are shown below: Polo Corporation & Solo Company Separate Balance Sheets January 1, 20X1 Solo Company Polo Carrying Current Corporation Amounts Amounts Cash $ 2,800,000 $ 621,486 $ 621,486 Accounts Receivable (net). 3,200,000 1,785,491 1,785,491 Inventory 6,000,000 4,770,490 5,200,490 Land. 18,000,000 7,000,000 8,000,000 Building 40,000,000 22,000,000 24,000,000 Machinery 10,000,000 2,496,996 3,600,000 Patent 500,000 600,000 Total Assets $80,000,000 $39,174.463 Liabilities and Stockholders Equity Current Liabilities $2,900,000 $1,428,000 $1,428,000 17,100,000 Long Term Note Payable Bonds Payable (See note) Premium on Bonds Payable 20,000,000 21,346,463 1,346,463 Common Stock Sio Par 20,000,000 Common Stock 52 Par 2,000,000 Paid in Capital in Excess of Pa 12.000.000 6,000,000 Retained Earnings 28,000,000 8,400,000 Total Liabilities and fitocholders Equity 580,000.000 $39,174,463 Note-the Bond is a 10% semiannual note payable in 5 years. It was issued on January 1, 20x0. On January 1, 20x1 Polo acquired all of Solo's outstanding common stock by insuing 1,500,000 shares of its common stock when the market price was $16. Out of pocket costs paid by Polo were as follow Legal fees for registration of the stock Finders fees SEC registration fees Accountants fees (half for registration, balance for consultation) $9.000 14,000 20,000 16,000 The building has an additional useful life of 40 years, there was no salvage value estimated, and the company uses the straight-line method of depreciation. The machinery has an additional useful life of 6 years, the salvage value is estimated to be $2,196, and the company uses the sum of the years digits depreciation method. The patent has an additional life of 10 years. Both companies use FIFO perpetual for accounting for inventories. Consider depreciation and amortization as operating expenses. The year of 20XI: The Solo Company had a very bad year and they reported a loss of $3,000,000 Even though it was a year with a loss the Company manages to declare and pay a dividend of 50.10 per share. The Solo Company records dividends through a dividends account A calculation showed that goodwill was impaired by $500,000 Solo sold 2,000,000 units of merchandise costing 4,000,000 to Polo for $4,600,000. Cash was paid. Polo sold 1,500,000 of the 2,000,000 units purchased from Solo to an outside customer. The year of 20X2: On January 1 Polo realized that Solo did not disclose the market rate of interest on the bond. They did not even know what it was. One of our bright accountanta figured it out. When they found out the rate they bought the bonds that very day at a market rate of 4% Under the management of Polo, Solo had a good year and reported a profit of $6,000,000 Solo declared and paid a dividend of 50,70 per share. Solo sold 2,400,000 units of merchandise costing $5,040,000 to Polo for $6,000,000, Cash was not paid yet. Polo sold 2,700,000 units purchased from Solo to an outside customer The year of 20X2: Solo continges to be very profitable. This year they reported a profit of $10,000,000 Solo declared and paid a dividend of 51 per share. Polo is thrilled! On January 1 Solo old land and a building to Polo at a price of $12,000,000. The book value on Solos' books is $11,000,000. It was agreed that the fair value of the total Solo properties at January 1, 20XI would be used as an aid to record this entry. The remaining life of the building is 40 years with no salvare. While Solo uses straight-line method of depreciation Polo decided to use double declining balance. The building cont Solo 59,750,000 10 years ato Sold 3,000,000 units of merchandise costing $6,000,000 to Polo for $7.800,000. Cash was paid. The entire isentory sold to Polo from Solo was sold to outside customers Required: Prepare the following journal entries in good form. Round off all numbers to the searest whole dollar Each entry has a stated point value. () at the end of the entry means it is worth 5 points Number each entry. If there are two entries then make one A and the other B. 1. Record the out of pocket costs (2) 2. Record the investment on the books of Polo as of 1/1/20x1. (2) Prepare the elimination entry as of 1/1/20X1. (5) 3. 4. Record Solo's loss on the books of Polo as of 1231 20X1. (2) 5. 6. Record the adjustment to the loss on the books of Polo as of 12/3120X1. (2) Record the sale of inventory to Polo on the books of Solo for 20X1. (2) Record the purchase of inventory from Solo on the books of Polo for 20X1. (1) 7. Record the accrued interest expense on the books of Solo for 20X1. (1) 9. 10 11 I 12 13 14 15. Record the dividend on the books of Polo for 20X1. (1) Record the dividend on the books of Solo for 20X1. (1) Prepare the elimination entry as of 1231 20X1 (9 Prepare the elimination entry for the sales to Solo as of 123120X1. (9) Prepare the reclass entry for the purchase of the boods) Record Selo profit on the books of Polo w of 12/31 2032. (2) Record the adjustment to the profit on the books of Polo w of 12/31/2012 (3) Prepare the elimination entry as of 1231 2032. (10) Prepare the elimination entry for the sales to Solo as of 1231 2002 (3) Prepare the eliminaties entry for the beads as of 12/31/20X2 (10) Record the sale of the land and the buildings on the books of Seo (3) Record the purchase of the land and the building on the books of Polo (3) Record Solo's profit on the books or Male of 123120X3) 16 17 18 19 20 Recordement to the profit on the books of Polo as of 12:31 2003) 23 Prepare the elimination entry as of 12/31/20X2. (10) 24. Prepare the elimination entry for the sales to Solo as of 1231 20X3. (5) 25 Prepare the elimination entry for the sales of the land and the building as of 12/31 20X3. (10) 26. Prepare the elimination entry for the bond as of 12/31/20X3.)