Question

In: Accounting

On January 1, 2016 Obama and Biden Companies had the following balance sheets: Obama Biden Journal...

On January 1, 2016 Obama and Biden Companies had the following balance sheets:

Obama Biden Journal Worksheet Consolidated
cash 1,000,000 20,000 1,020,000
land 1,000,000 50,000 1,050,000
equipment 2,000,000 100,000 2,100,000
a/d equipment 1,000,000 50,000 1,050,000
building 2,000,000 100,000 2,100,000
a/d building 1,000,000 50,000 1,050,000
Investment 0
Good will 0
total assets 4,000,000 170,000 4,170,000
accounts payable 1,000,000 20,000 1,020,000
common stock 1,000,000 5,000 1,005,000
apic common stock 1,000,000 45,000 1,045,000
retained earnings 1,000,000 100,000 1,100,000
On January 2nd Obama purchased 60% of Biden for $190,000.   The fair market value of Biden's land is $60,000; the fair market value of the equipment is $10,000
and the fair market value of the building is $40,000. The equipment has a 5 year remaining live (no salvage) and the builidng has a 10 year remaining life (no salvage)
REQUIRED:   A) MAKE THE JOURNAL ENTRY OBAMA MAKES WHEN IT ACQUIRES BIDEN
B) MAKE THE WORKSHEET ENTRIES NEEDED TO PREPARE THE CONSOLIDATED BALANCE SHEET
C) PREPARE A CONSOLIDATED BALANCE SHEET ON JANUARY 2ND…DON'T FORGET ABOUT OBAMA'S PAYMENT
THIS IS A CONTINUATION OF PURCHASE PROBLEM
IN 2016 OBAMA AND BIDEN REPORTED THE FOLLOWING FINANCIAL STATEMENTS
OBAMA BIDEN
SALES 900,000 80,000
DEPRECIATION EQUIP 200000 10000
DEPRECIATION BLDG 100000 5000
INVESTMENT INCOME A 0
INCOME B 65,000
Obama Biden
cash 2,065,000 65,000
land 1,000,000 50,000
equipment 2,000,000 100,000
a/d equipment 1,200,000 60,000
building 2,000,000 100,000
a/d building 1,100,000 55,000
INVESTMENT C
total assets 4,765,000 200,000
accounts payable 1,000,000 20,000
common stock 1,000,000 5,000
apic common stock 1,000,000 45,000
retained earnings D 130,000
and the fair market value of the building is $40,000. The equipment has a 5 year remaining live (no salvage) and the builidng has a 10 year remaining life (no salvage)
REQUIRED;   USING WHICHEVER METHOD YOU LIKE (INITIAL VALUE, PARTIAL EQUITY OR FULL EQUITY) MAKE THE JOURNAL ENTRIES OBAMA DOES IN 2016
DUE TO ITS INVESTMENT IN BIDEN (YOU CAN IGNORE THE PURCHASE; JUST THOSE AFTER JANUARY 5TH)
PREPARE THE WORKSHEET ENTRIES NEEDED DECEMBER 31  
PREPARE A CONSOLIDATED INCOME STATEMENT FOR 2016
PREPARE A CONSOLATED BALANCE SHEET FOR DECEMBER 31 2016.  

Solutions

Expert Solution

A) Journal entry in the individual books of Obama
2-Jan-16 Investment in Biden A/c          190,000
To cash       (190,000)
Being 60% stake purchased in Biden
B) WORKSHEET ENTRIES NEEDED TO PREPARE THE CONSOLIDATED BALANCE SHEET
Net asset of Biden
Total assets          170,000
Account payable          (20,000)
Net assets          150,000
Increase in fair value of land (60000-50000)            10,000
Decrease in fair value of equipment (50000-10000)          (40,000)
Decrease in fair value of building (50000-40000)          (10,000)
Adjusted net asset          110,000
Value of 60% stake            66,000
Investment in Biden          190,000
Goodwill          124,000
Minority balance            44,000
C) CONSOLIDATED BALANCE SHEET ON JANUARY 2ND
Obama Biden Adjustment Consolidated
cash (note 1)         810,000 20,000 830,000
land       1,000,000 50,000         10,000 1,060,000
equipment       2,000,000 100,000        (40,000) 2,060,000
a/d equipment       1,000,000 50,000 1,050,000
building       2,000,000 100,000        (10,000) 2,090,000
a/d building       1,000,000 50,000 1,050,000
Investment (note 1)         190,000       (190,000) 0
Good will        124,000 124,000
total assets       4,000,000 170,000       (106,000) 4,064,000
accounts payable       1,000,000 20,000 1,020,000
Minority interest         44,000 44000
common stock       1,000,000 5,000          (5,000) 1,000,000
apic common stock       1,000,000 45,000        (45,000) 1,000,000
retained earnings       1,000,000 100,000       (100,000) 1,000,000
Total       4,000,000 170,000 -106,000 4,064,000
Note 1: cash has been adjusted to reflect investment in Biden

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