Question

BACC460

Assignment 4 (LO3)

Trial balance data for Peanut and Snoopy as of December 31, 2018 follows. Peanut company acquired 100% of the shares of Snnopy at $ (700,220) when the book value of Snoopy’s net assets was equal to $344,000. At that date the fair value of Building and equipment was $40,000 more than the book value. Building and equipment are depreciated on a 5-year basis. At December 31, 2018, Peanut Company concluded that good will involved in the acquisition of Snoopy has been impaired and the correct carrying value was $10,000. Peanut uses the equity method to account for investments.

	Peanut Company		Snoopy Company
	Dr	Cr	Dr	Cr
Cash	463,300*		80,000
Accounts receivable	168,000		82,000
Inventory	212,000		94,000
Investment in Snoopy	0*
Land	210,000		91,000
Building and Equipment	714,000		190,000
Cost of Goods Sold	196,000		111,000
depreciation Expense	47,000		9,000
Selling & administrative Expense	223,000		38,000
Dividends declared	90,000		27,000
Accumulated Depreciation		444,000		18,000
Accounts Payable		64,000		49,000
Bonds Payable		182,000		68,000
Common Stock		483,000		181,000
Retained Earnings		356,300		163,000
Sales		794,000		243,000
Income from Snoopy		*		0
Total	2,323,300	2,323,300	722,000	722,000

Instructions:

a) Prepare the journal entries in Peanut Company books to record the transaction related to the investment in Snoopy.

  Acquisition of 100 % of shares in Snoopy for $( ** it should be around 400,000 to 700,000 according to your ids) cash

b) Post the previous transactions to   the ledger and find new balances. (*) and Prepare a consolidated worksheet in good form.

Answer 1

Since the available cash ie 463300 is less than investment made ie 700220, we assume we have a bank overdraft facility.

So, Journal Entry are:

Investment in Snoopy Dr	700220
To Cash a/c (or Bank Overdraft)		700220
(Investment made)
Cash a/c Dr	27000
Income from Snoopy a/c		27000
(Income received)

Income from snoopy

To Balance c/d	27000	By Cash a/c Dr	27000
	27000		27000

Investment in Snoopy

To Cash a/c	700220	By Balance c/d	700220
	700220		700220

Cash a/c / Bank Overdraft

To balance b/d	463300	By Investment in Snoopy	700220
To Income from Snoopy	27000
To Balance c/d	209920
	700220		700220

Consolidation Worksheet:

	Peanut Company		Snoopy Company		Consolidation adjustment	Consoldiated Balances
	Cash	-209,920		80,000		-129,920
Accounts receivable		168,000		82,000			250,000
Inventory		212,000		94,000			306,000
Investment in Snoopy		700220				-700220	0
Land		210,000		91,000			301,000
Building and Equipment		714,000		190,000		40000	944,000
Cost of Goods Sold		196,000		111,000			307,000
depreciation Expense		47,000		9,000			56,000
Selling & administrative Expense		223,000		38,000			261,000
Dividends declared		90,000		27,000		-27000	90,000
Accumulated Depreciation			444,000		18,000			462000
Accounts Payable			64,000		49,000			113000
Bonds Payable			182,000		68,000			250000
Common Stock			483,000		181,000	-181,000		483,000
Retained Earnings			356,300		163,000	-163,000		356,300
Sales			794,000		243,000			1037000
Income from Snoopy			27000		0	-27000		0
Goodwill						10000	10,000
Impairment loss on goodwill						306220	306,220
Total		2,350,300	2,350,300	722,000	722,000		2,701,300	2,701,300