Question
What are all of the answers to Problem 35 in chapter 5 in the book Advanced Financial Accounting 11th edition? Mortar Corporation acquired 80 percent
What are all of the answers to Problem 35 in chapter 5 in the book Advanced Financial Accounting 11th edition?
Mortar Corporation acquired 80 percent ownership of Granite Company on January 1, 20X7, for $173,000. At that date, the fair value of the noncontrolling interest was $43,250. The trial balances for the two companies on December 31, 20X7, included the following amounts: |
Mortar Corporation | Granite Company | ||||||||
Item | Debit | Credit | Debit | Credit | |||||
Cash | $ | 38,000 | $ | 25,000 | |||||
Accounts Receivable | 50,000 | 55,000 | |||||||
Inventory | 240,000 | 100,000 | |||||||
Land | 80,000 | 20,000 | |||||||
Buildings & Equipment | 500,000 | 150,000 | |||||||
Investment in Granite Company Stock | 202,000 | ||||||||
Cost of Goods Sold | 500,000 | 250,000 | |||||||
Depreciation Expense | 25,000 | 15,000 | |||||||
Other Expense | 75,000 | 75,000 | |||||||
Dividends Declared | 50,000 | 20,000 | |||||||
Accumulated Depreciation | $ | 155,000 | $ | 75,000 | |||||
Accounts Payable | 70,000 | 35,000 | |||||||
Mortages Payable | 200,000 | 50,000 | |||||||
Common Stock | 300,000 | 50,000 | |||||||
Retained Earnings | 290,000 | 100,000 | |||||||
Sales | 700,000 | 400,000 | |||||||
Income from Subsidiary | 45,000 | ||||||||
$ | 1,760,000 | $ | 1,760,000 | $ | 710,000 | $ | 710,000 | ||
Additional Information |
1. | On January 1, 20X7, Granite reported net assets with a book value of $150,000 and a fair value of $191,250. Accumulated depreciation on Buildings and Equipment was $60,000 on the acquisition date. | ||||||||
2. | Granites depreciable assets had an estimated economic life of 11 years on the date of combination. The difference between fair value and book value of Granites net assets is related entirely to buildings and equipment. | ||||||||
3. | Mortar used the equity method in accounting for its investment in Granite. | ||||||||
4. | Detailed analysis of receivables and payables showed that Granite owed Mortar $16,000 on December 31, 20X7.
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