Pearson Company owns 90% of the outstanding common stock of Spring Company. On January 1, 2014,...

Pearson Company owns 90% of the outstanding common stock of Spring Company. On January 1, 2014, Spring Company sold equipment to Pearson Company for $206,850. Spring Company had purchased the equipment for $316,700 on January 1, 2009, and had depreciated it using a 10% straight-line rate. The management of Pearson Company estimated that the equipment had a remaining useful life of five years on January 1, 2014. In 2015, Pearson Company reported $163,200 and Spring Company reported $107,300 in net income from their independent operations (including sales to affiliates).

(a)

Prepare in general journal form the workpaper entries relating to the intercompany sale of equipment that are necessary in the December 31, 2014, and December 31, 2015, consolidated financial statements workpapers. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Solutions

Expert Solution

Cost of equipment	$316,700
Accumulated Depreciation ($316,700 × .10 × 5 years)	$158,350
Book value 1/1 2014	$158,350
Proceeds from sale	$206,850
Gain on sale	$48,500

Part A.

	2014
(1)
	Equipment ($316,700 - $206,850)	$109,850
	Gain on Sale of Equipment	$48,500
	Accumulated Depreciation($316,700)(5/10)		$158,350

(2)	Accumulated Depreciation – Equipment	$9,700
	Depreciation Expense ($48,500/5)		$9,700

	2012
(1)	Equipment	$109,850
	Beginning Retained Earnings – Pearson (.9 × $48,500)	$43,650
	Noncontrolling Interest (.1 × $48,500)	$4,850
	Accumulated Depreciation – Equipment		$158,350

(2)	Accumulated Depreciation – Equipment	$19,400
	Depreciation Expense		$9,700
	Beginning Retained Earnings – Pearson (.9 × $9,700)		$8,730
	Noncontrolling Interest (.10 × $9,700)		$970

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

On January 1, 2014, Pert Company purchased 85% of the outstanding common stock of Sales Company...

On January 1, 2014, Pert Company purchased 85% of the outstanding common stock of Sales Company for$350,000.On that date, Sales Company’s stockholders’ equity consisted of common stock, $100,000; other con-tributed capital, $40,000; and retained earnings, $140,000. Pert Company paid more than the book value of netassets acquired because the recorded cost of Sales Company’s land was significantly less than its fair value.During 2014 Sales Company earned $148,000 and declared and paid a $50,000 dividend. Pert Companyused the partial equity method...

Price Company purchased 90% of the outstanding common stock of Score Company on January 1, 2009,...

Price Company purchased 90% of the outstanding common stock of Score Company on January 1, 2009, for $450,000. At that time, Score Company had stockholders' equity consisting of common stock, $200,000; other contributed capital, $160,000; and retained earnings $90,000. On December 31, 2013, trial balances for Price Company and Score Company were as follows: Price Score Cash 1,09,000 78,000 Accounts recevaable 1,66,000 94,000 Note receivable 75,000 0 Inventory 3,09,000 1,58,000 Investment in score company 6,33,600 0 Plant and equipment 9,40,000...

On January 1, 2012, Parker Company purchased 90% of the outstanding common stock of Sid Company...

On January 1, 2012, Parker Company purchased 90% of the outstanding common stock of Sid Company for $180,000. At that time, Sid’s stockholders’ equity consisted of common stock, $120,000; other contributed capital, $20,000; and retained earnings, $25,000. Assume that any difference between book value of equity and the value implied by the purchase price is attributable to land. On December 31, 2012, the two companies’ trial balances were as follows: Parker Sid Cash $65,000 $35,000 Accounts Receivable 40,000 30,000 Inventory...

Price Company purchased 90% of the outstanding common stock of Score Company on January 1, 2011,...

Price Company purchased 90% of the outstanding common stock of Score Company on January 1, 2011, for $450,450. At that time, Score Company had stockholders’ equity consisting of common stock, $202,200; other contributed capital, $162,200; and retained earnings, $91,300. On December 31, 2015, trial balances for Price Company and Score Company were as follows: Price Score Cash $107,300 $79,300 Accounts Receivable 162,800 95,200 Note Receivable 74,600 —0— Inventory 303,900 158,600 Investment in Score Company 450,450 —0— Plant and Equipment 927,600...

On January 1, 2010, Paprika Company Purchased 90% of the outstanding common stock of sage company...

On January 1, 2010, Paprika Company Purchased 90% of the outstanding common stock of sage company by issuing 30,000 shares of its $10 par ($60 market value) common stock $ 150,000 other contributed capital, $1,060,000; and retained earnings, $120,000. Paprika company paid more than the book value of the net assets because of the recorded cost of sage company’s land was signed less than its fair value (which accounts for the entire difference) During 2010 Sage Company Lost 100000 and...

7) P Company owns 80% of the outstanding common stock of S Company. On January 1....

7) P Company owns 80% of the outstanding common stock of S Company. On January 1. 2018, S Company sold land to P Company for OMR 500,000. S Company originally purchased the land for OMR 300,000. On January 1, 2019, P Company Sold the land purchased from S Company to a company outside the affiliated group for OMR 600,000. A. Prepare the journal entry of intercompany sales. B. Prepare in general journal form the workpaper entries necessary because of the...

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...

Park Company purchased 90% of the stock of Salt Company on January 1, 2014, for $465,000,...

Park Company purchased 90% of the stock of Salt Company on January 1, 2014, for $465,000, an amount equal to $15,000 in excess of the book value of equity acquired. This excess payment relates to an undervaluation of Salt Company’s land. On the date of purchase, Salt Company’s retained earnings balance was $50,000. The remainder of the stockholders’ equity consists of no-par common stock. During 2018, Salt Company declared dividends in the amount of $10,000, and reported net income of...

The Nathan Company acquired all of the outstanding stock of Caleb Company on January 1, 2014...

The Nathan Company acquired all of the outstanding stock of Caleb Company on January 1, 2014 for P267,800 cash. Caleb had a book value of only P182,000 on that date. However, equipment (having an eight-year life) is undervalued by P52,000 on Caleb’s financial records. A building with a 20-year life was overvalued by P13,000. Subsequent to the acquisition, Caleb reported the following: Net Income Dividends Paid 2014 P 65,000 P 13,000 2015 78,000 52,000 2016 39,000 26,000 In accounting for...

Petunia Corporation acquired 90 percent of the stock of Spring Company on January 1, 20X2, for...

Petunia Corporation acquired 90 percent of the stock of Spring Company on January 1, 20X2, for $360,000. At that date, the fair value of the noncontrolling interest was $40,000. Spring’s balance sheet contained the following amounts at the time of the combination: Cash $ 20,000 Accounts Payable $ 25,000 Accounts Receivable 60,000 Bonds Payable 75,000 Inventory 70,000 Common Stock 100,000 Buildings and Equipment (net) 350,000 Retained Earnings 300,000 Total Assets $ 500,000 Total Liabilities & Equity $ 500,000 During...

Subjects