In: Accounting
Lake Company reported the following summarized balance sheet data as of December 31, 20X2:
Cash | $ | 38,000 | Accounts Payable | $ | 49,000 | |
Accounts Receivable | 87,000 | Common Stock | 130,000 | |||
Inventory | 96,000 | Retained Earnings | 207,000 | |||
Buildings & Equipment | 285,000 | |||||
Less: Accumulated Depreciation | (120,000) | |||||
Total Assets | $ | 386,000 | Total Liabilities & Equities | $ | 386,000 |
Lake issues 4,400 additional shares of its $10 par value stock to its shareholders as a stock dividend on April 20, 20X3. The market price of Lake’s shares at the time of the stock dividend is $40. Lake reports net income of $32,000 and pays a $14,500 cash dividend in 20X3. Lindale Company acquired 70 percent of Lake’s common shares at book value on January 1, 20X1. At that date, the fair value of the noncontrolling interest was equal to 30 percent of Lake’s book value. Lindale uses the equity method in accounting for its investment in Lake.
Required:
a.
Prepare the journal entries recorded by Lake and Lindale at the time the stock dividend is declared and distributed. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
*Record the issuance of a stock dividend by Lake Company.
*Record the issuance of a stock dividend by Lake Company in the books of Lindale.
b.
Prepare the worksheet consolidation entries needed to prepare consolidated financial statements for 20X3. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
*Record the basic consolidation entry.
c.
Prepare the worksheet consolidation entry needed to prepare a consolidated balance sheet on January 1, 20X4. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
*Record the basic consolidation entry.
a) Journal Entries | ||||
Lake company | ||||
Stock dividends Declared | 44000 | |||
to common stock | 44000 | |||
Lindale company = no entry required | ||||
b) calculation of Book value | ||||
Particulars | NCI 30% + | Lindale co70% = | common stock + | Retained earning |
original book value | 101100 | 235900 | 130000 | 207000 |
Add: net income | 9600 | 22400 | 32000 | |
less: dividends | 4350 | 10150 | -14500 | |
less: stock dividend | 44000 | -44000 | ||
ending book value | 106350 | 248150 | 174000 | 180500 |
common stock | 174000 | |||
retained earning | 207000 | |||
income from lake co | 22400 | |||
NCI in NI of lake co | 9600 | |||
devidend declared | 14500 | |||
stock dividends declared | 44000 | |||
investment in lake co | 248150 | |||
NCI IN NA of lake co | 106350 | |||
C) Calculation of Book value | ||||
Particulars | NCI 30% + | Lindale co70% = | common stock + | Retained earning |
Original books value | 106350 | 248150 | 174000 | 180500 |
total | 106350 | 248150 | 174000 | 180500 |
Common stock | 174000 | |||
retained earning | 180500 | |||
investment in lake co | 248150 | |||
NCIIN NA OF LAKE CO | 106350 |