Question

Pizza Corporation acquired 80 percent ownership of Slice Products Company on January 1, 20X1, for $151,000. On that date, the fair value of the noncontrolling interest was $37,750, and Slice reported retained earnings of $49,000 and had $92,000 of common stock outstanding. Pizza has used the equity method in accounting for its investment in Slice.

Trial balance data for the two companies on December 31, 20X5, are as follows:
  

	Pizza Corporation						Slice Products Company
Item	Debit			Credit			Debit			Credit
Cash & Receivables	$	84,000					$	76,000
Inventory		273,000						101,000
Land		89,000						89,000
Buildings & Equipment		517,000						161,000
Investment in Slice Products Company		174,940
Cost of Goods Sold		113,000						49,000
Depreciation Expense		23,000						13,000
Inventory Losses		13,000						5,000
Dividends Declared		46,000						13,200
Accumulated Depreciation				$	198,000					$	91,000
Accounts Payable					41,000						18,000
Notes Payable					273,560						123,200
Common Stock					291,000						92,000
Retained Earnings					305,000						82,000
Sales					201,000						101,000
Income from Slice Products Company					23,380
	$	1,332,940		$	1,332,940		$	507,200		$	507,200

Additional Information

1. On the date of combination, the fair value of Slice's depreciable assets was $47,750 more than book value. The accumulated depreciation on these assets was $10,000 on the acquisition date. The differential assigned to depreciable assets should be written off over the following 10-year period.
2. There was $12,000 of intercorporate receivables and payables at the end of 20X5.

Required:
a. Prepare all journal entries that Pizza recorded during 20X5 related to its investment in Slice. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1. Record Pizza Corporation.'s 80% share of Slice Wood Company's 20X5 income.

2. Record Pizza Corporation's 80% share of Slice Company's 20X5 dividend.

3. Record the amortization of the excess acquisition price.

b. Prepare all consolidation entries needed to prepare consolidated statements for 20X5. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1. Record basic consolidation entry.

2. Record the amortized excess value reclassification entry.

3. Record the excess value (differential) reclassification entry.

4.  Record the entry to eliminate the intercompany accounts.

c. Prepare a three-part worksheet as of December 31, 20X5. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)

Answer 1

Date	Particular	Debit	Credit
1	Investment in Slice Products Company	27200
	Income from Slice Products Company ((101000-49000-13000-5000*80%)		27200
	( record Pizza Corporation’s 80% Slice Products Company 's 20X1 income)
2	Cash	10560
	Investment in Slice Products Company (13200*80%)		10560
	record Pizza Corporation’s 80% share of Slice Products Company 's 20X1 dividend)
3	Income from Slice Products Company	3820
	Investment in Slice Products Company (47750/10*80%		3820
	(Record amortization of excess acquisition price)

	NCI 20%	+	Master Corp. 80%	=	Common Stock	+	Retained Earnings
Original Book value	34800	+	139200		92000	+	82000
+Net Income	6800	+	27200				34000
- Dividend	(2640)	+	(10560)				(13200)
Ending Book value	38960	+	155840		92000		102800

Basic elimination entry
Common Stock	92000
Retained Earning	82000
Income from Slice Products Company	27200
NCI in NI of Slice Products Company	6800
Dividend Declared		13200
Investment in Slice Products Company		155840
NCI in NA of Slice Products Company		38960

Excess Value (Differential) Calculations:
	NCI 20%	+	Master Corp. 80%	=	Building and equipment	+	Acc. dep
Begining Bal.	6800	+	27200		47750	+	(13750)
Changes	(955)	+	(3820)				(4775)
Ending Bal.	5845	+	23380		47750		(18525)

Amortized excess value reclassification entry:
Depreciation	4775
Income from Slice Products Company		3820
NCI in NI of Slice Products Company		955

Excess value (differential) reclassification entry:
Buildings & Equipment	47750
Acc.Depreciation		18525
Income from Slice Products Company		23380
NCI in NI of Slice Products Company		5845

Accounts payable dr. - 12000

Cash and recevable - 12000

	Pizza corporation	Slice products company	Elimination entries		Consolidated
Income Statement			Dr	CR
Sales	201000	101000			302000
Less: COGS	(113000)	(49000)			(162000)
Less: Depreciation Expenses	(23000)	(13000)	4775		(40775)
Less - inventory loss	(13000)	(5000)			(18000)
Income from Slice Products Company	23380		27200	3820	-
Consolidated Net Income	75380	34000	31975	3820	81225
NCI in Net Income			6800	(955)	(5845)
Controlling Interest in Net Income	75380	34000	38775	2865	75380
Statement of Retained Earnings
Beginning Balance	305000	82000	82000		305000
net income	75380	34000	38775	2865	75380
Less: Dividends Declared	(46000)	(13200)		13200	(46000)
Ending balances	334380	102800	120775	16065	334380
Balance Sheet
Cash and Receivable	84000	76000			160000
Inventory	273000	101000			374000
Land	89000	89000			178000
Buildings & Equipment	517000	161000	47750		725750
Less: Accumulated Depreciation	(198000)	(91000)		18525	(307525)
Investment in Slice Products Company	174940			174940	0
Total Assets					1130225
Accounts Payable	41000	18000	12000		47000
Notes payable	273560	123200			396760
Common Stock	291000	92000	92000		291000
Retained Earnings	334380	102800	120775	16065	334380
				4775
					1073915