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Post Delivery Service acquired at book value 80 percent of the voting shares of Script Real...

Post Delivery Service acquired at book value 80 percent of the voting shares of Script Real Estate Company. On that date, the fair value of the noncontrolling interest was equal to 20 percent of Script’s book value. Script Real Estate reported common stock of $300,000 and retained earnings of $105,000. During 20X3, Post Delivery provided courier services for Script Real Estate in the amount of $23,000. Also during 20X3, Script Real Estate purchased land for $5,000. It sold the land to Post Delivery Service for $26,000 so that Post Delivery could build a new transportation center. Post Delivery reported $59,000 of operating income from its delivery operations in 20X3. Script Real Estate reported net income of $69,000 and paid dividends of $10,500 in 20X3.

Required:
a. Compute consolidated net income for 20X3.



b. Prepare all journal entries recorded by Post Delivery Service related to its investment in Script Real Estate assuming Post uses the fully adjusted equity method in accounting for the investment. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)



c. Prepare all consolidation entries required in preparing a consolidation worksheet as of December 31, 20X3. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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Answer
Explanation :
a) consolidated net income for 20X3
Operating income $          59,000
Net Income $          69,000
Less : Unrealized gain on sale $          21,000
Realized net income Script Real Estate $          48,000
Consolidated net income for 20X3 $       1,07,000
b) Journal entris
Account Titles and Explanation Debit Credit
Cash (10500*80%) $            8,400
To, Investment in Script Real Estate $            8,400
Investment in Script Real Estate (69000*80%) $          55,200
To, Income from Investment $          55,200
Income from Investment in Script Real Estate(21000*80%) $          16,800
To, Investment in Script Real Estate $          16,800
c) Consolidation entries
Common stock $       3,00,000
Retained earnigs $       1,05,000
Income from Investment in Script Real Estate (48000*80%) $          38,400
Non-controlling interest in Script Real Estate (48000*20%) $            9,600
   To, Dividend paid by Script Real Estate $          10,500
To, Investment in Script Real Estate (300,000+105,000+48000-10500)*80% $       3,54,000
To, Non-controlling interest in Script Real Estate (300,000+105,000+69000-10500)*20% $          92,700
Gain on sale of land $          21,000
To Land $          21,000
Service revenue $          26,000
To, Delivery expenses $          26,000

ekkarill92 answered 8 months ago
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