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In: Accounting

Lake Company reported the following summarized balance sheet data as of December 31, 20X2:   Cash $...

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.

Solutions

Expert Solution

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

ekkarill92 answered 2 years ago
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