Question
In: Accounting
On January 1, 20X7, Pepper Company acquired 90 percent of the outstanding common stock of Salt...
On January 1, 20X7, Pepper Company acquired 90 percent of the
outstanding common stock of Salt Corporation for $1,242,000. On
that date, the fair value of noncontrolling interest was equal to
$138,000. The entire differential was related to land held by Salt.
At the date of acquisition, Salt had common stock outstanding of
$520,000, additional paid-in capital of $200,000, and retained
earnings of $540,000. During 20X7, Salt sold inventory to Pepper
for $440,000. The inventory originally cost Salt $360,000. By
year-end, 30 percent was still in Pepper's ending inventory. During
20X8, the remaining inventory was resold to an unrelated customer.
Both Pepper and Salt use perpetual inventory systems.
Income and dividend information for both Pepper and Salt for 20X7
and 20X8 are as follows:
| Pepper Company | Salt Corp. | ||||||||||||
| Operating Income |
Dividends | Net Income | Dividends | ||||||||||
| 20X7 | $ | 860,000 | $ | 160,000 | $ | 360,000 | $ | 200,000 | |||||
| 20X8 | 910,000 | 200,000 | 420,000 | 200,000 | |||||||||
Assume Pepper uses the fully adjusted equity method to account for
its investment in Salt.
Required:
a. Present the worksheet consolidation entries necessary to prepare
consolidated financial statements for 20X7.
b. Present the worksheet consolidation entries necessary to prepare
consolidated financial statements for 20X8.
Solutions
ekkarill92 answered 3 months agoRelated Solutions
On January 1, 20X7, Pepper Company acquired 90 percent of the outstanding common stock of Salt...
On January 1, 20X7, Pepper Company acquired 90 percent of the
outstanding common stock of Salt Corporation for $1,242,000. On
that date, the fair value of noncontrolling interest was equal to
$138,000. The entire differential was related to land held by Salt.
At the date of acquisition, Salt had common stock outstanding of
$520,000, additional paid-in capital of $200,000, and retained
earnings of $540,000. During 20X7, Salt sold inventory to Pepper
for $440,000. The inventory originally cost Salt $360,000. By...
Pepper Company acquired 90 percent of Salt Company's stock at underlying book value on January 1,...
Pepper Company acquired 90 percent of Salt Company's stock at
underlying book value on January 1, 20X8. At that date, the fair
value of the non-controlling interest was equal to 10 percent of
the book value of Salt Company. Salt Co. sold equipment to Pepper
Co. for a $360,000 on December 31, 20X8. Salt Co. had originally
purchased the equipment for $400,000 on January 1, 20x5, with a
useful life of 10 years and no salvage value. At the time...
Pepper Company acquired 80 percent of Salt Company's stock at underlying book value on January 1,...
Pepper Company acquired 80 percent of Salt Company's stock at
underlying book value on January 1, 2018. Pepper Company acquired
80 percent of Salt Company's stock at underlying book value on
January 1, 2018. At that date, Salt reported common stock
outstanding of $1,050,000 and retained earnings of $840,000; the
fair value of the noncontrolling interest was equal to 20 percent
of the book value of Salt Company. Salt Co. sold equipment to
Pepper Co. for a $720,000 on December...
Pepper Company acquired 80 percent of Salt Company's stock at underlying book value on January 1,...
Pepper Company acquired 80 percent of Salt Company's stock at
underlying book value on January 1, 2018. Pepper Company acquired
80 percent of Salt Company's stock at underlying book value on
January 1, 2018. At that date, Salt reported common stock
outstanding of $1,050,000 and retained earnings of $840,000; the
fair value of the noncontrolling interest was equal to 20 percent
of the book value of Salt Company. Salt Co. sold equipment to
Pepper Co. for a $720,000 on December...
Pepper Company acquired 80 percent of Salt Company's stock at underlying book value on January 1,...
Pepper Company acquired 80 percent of Salt Company's stock at
underlying book value on January 1, 2018. At that date, Salt
reported common stock outstanding of $1,050,000 and retained
earnings of $840,000; the fair value of the noncontrolling interest
was equal to 20 percent of the book value of Salt Company. Salt Co.
sold equipment to Pepper Co. for a $720,000 on December 31, 2018.
Salt Co. had originally purchased the equipment for $800,000 on
January 1, 2015, with a...
Peanut Company acquired 90 percent of Snoopy Company’s outstanding common stock for $319,500 on January 1,...
Peanut Company acquired 90 percent of Snoopy Company’s
outstanding common stock for $319,500 on January 1, 2019, when the
book value of Snoopy’s net assets was equal to $355,000. Peanut
uses the equity method to account for investments. The following
trial balance summarizes the financial position and operations for
Peanut and Snoopy as of December 31, 2019:
Peanut Company
Snoopy Company
Debit
Credit
Debit
Credit
Cash
255,000
75,000
Accounts Receivable
190,000
80,000
Inventory
180,000
100,000
Investment in Snoopy Stock
364,500...
On January 1, 2020, QuickPort Company acquired 90 percent of the outstanding voting stock of NetSpeed,...
On January 1, 2020, QuickPort Company acquired 90 percent of the
outstanding voting stock of NetSpeed, Inc., for $1,161,000 in cash
and stock options. At the acquisition date, NetSpeed had common
stock of $1,220,000 and Retained Earnings of $61,000. The
acquisition-date fair value of the 10 percent noncontrolling
interest was $129,000. QuickPort attributed the $9,000 excess of
NetSpeed's fair value over book value to a database with a
five-year remaining life.
During the next two years, NetSpeed reported the following:...
On January 1, 2020, QuickPort Company acquired 90 percent of the outstanding voting stock of NetSpeed,...
On January 1, 2020, QuickPort Company acquired 90 percent of the
outstanding voting stock of NetSpeed, Inc., for $1,152,000 in cash
and stock options. At the acquisition date, NetSpeed had common
stock of $1,210,000 and Retained Earnings of $60,500. The
acquisition-date fair value of the 10 percent noncontrolling
interest was $128,000. QuickPort attributed the $9,500 excess of
NetSpeed's fair value over book value to a database with a
five-year remaining life.
During the next two years, NetSpeed reported the following:...
On January 1, 2017, QuickPort Company acquired 90 percent of the outstanding voting stock of NetSpeed,...
On January 1, 2017, QuickPort Company acquired 90 percent of the
outstanding voting stock of NetSpeed, Inc., for $855,000 in cash
and stock options. At the acquisition date, NetSpeed had common
stock of $860,000 and Retained Earnings of $43,000. The
acquisition-date fair value of the 10 percent noncontrolling
interest was $95,000. QuickPort attributed the $47,000 excess of
NetSpeed's fair value over book value to a database with a
five-year remaining life.
During the next two years, NetSpeed reported the following:...
On January 1, 2017, Travers Company acquired 90 percent of Yarrow Company's outstanding stock for $918,000....
On January 1, 2017, Travers Company acquired 90 percent of
Yarrow Company's outstanding stock for $918,000. The 10 percent
noncontrolling interest had an assessed fair value of $102,000 on
that date. Any acquisition-date excess fair value over book value
was attributed to an unrecorded customer list developed by Yarrow
with a remaining life of 15 years.
On the same date, Yarrow acquired an 80 percent interest in
Stookey Company for $520,000. At the acquisition date, the 20
percent noncontrolling interest...
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