Question

In: Accounting

On December 31, 20X6, Greenly Corporation and Lindy Company entered into a business combination in which...

On December 31, 20X6, Greenly Corporation and Lindy Company entered into a business combination in which Greenly acquired all of Lindy’s common stock for $957,000. At the date of combination, Lindy had common stock outstanding with a par value of $117,000, additional paid in capital of $412,000, and retained earnings of $175,000. The fair values and book values of all Lindy’s assets and liabilities were equal at the date of combination, except for the following:

Book Value Fair Value
  Inventory $ 56,000 $ 61,000
  Land 90,000 170,000
  Buildings 412,000 515,000
  Equipment 515,000 580,000

The buildings had a remaining life of 20 years, and the equipment was expected to last another 10 years. In accounting for the business combination, Greenly decided to use push-down accounting on Lindy’s books.

During 20X7, Lindy earned net income of $99,000 and paid a dividend of $68,000. All of the inventory on hand at the end of 20X6 was sold during 20X7. During 20X8, Lindy earned net income of $101,000 and paid a dividend of $68,000.

Required:

a.

Record the acquisition of Lindy's stock on Greenly's books on December 31, 20X6. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

*Record the initial investment in Lindy Co.

b.

Record any entries that would be made on December 31, 20X6, on Lindy’s books related to the business combination if push-down accounting is employed. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

*Record the evaluation of the assets of Lindy Co.

c.

Present all consolidating entries that would appear in the worksheet to prepare a consolidated balance sheet immediately after the combination. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

*Record the basic consolidation entry.

d.

Present all entries that Greenly would record during 20X7 related to its investment in Lindy if Greenly uses the equity-method of accounting for its investment. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

*Record the dividend received from Lindy Co.

e.

Present all consolidating entries that would appear in the worksheet to prepare a full set of consolidated financial statements for the year 20X7. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

*Record the basic consolidation entry.

f.

Present all consolidating entries that would appear in the worksheet to prepare a full set of consolidated financial statements for the year 20X8. (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

Part A

Account titles debit credit
Investment in Lindy Company stock 957000
Cash 957000

Part B

Credit debit
Inventory (61000-56000) 5000
Land (170000-90000) 80000
Buildings (515000-412000) 103000

Equipment (580000-515000)

Revaluation capital

65000

253000

Part C

Accounts title and explanation debit credit
Capital stock - Lindy Company 117000
Additional paid in capital 412000
Retained earnings 175000
Revaluation capital 253000
Investment in Lindy Company stock 957000

Part D

Accounts title and explanation debit credit
Cash 68000
Investment in Lindy Company stock 68000
Record dividend from Lindy Company
Investment in Lindy Company stock 99000
Income from Lindy Company 99000
Record equity - method income

Part E

Accounts title and explanation debit credit
Capital stock - Lindy Company 117000
Additional paid in capital 412000
Retained earnings Jan 1 175000
Revaluation capital 253000
Income from Lindy Company 99000

Dividends declared

Investment in Lindy Company stock (balancing figure)

68000

98800p

Part F

Accounts title and explanation debit credit
Common Stock - Lindy Company 117000
Additional paid in capital 412000
Retained earnings Jan 1 (175000+99000-68000) 206000
Revaluation capital 253000
Income from Lindy Company 101000
Dividends declared 68000
Investment in Lindy Company stock (balancing figure) 1021000

ekkarill92 answered 7 months ago
Next > < Previous

Related Solutions

On December 31, 20x6, the Jimmy Corporation, an entity subject to ASPE, entered into lease-buyback arrangement...
On December 31, 20x6, the Jimmy Corporation, an entity subject to ASPE, entered into lease-buyback arrangement with the George Finance Company to sell specialized production equipment. The equipment has an original cost of $2,300,000, accumulated depreciation of $850,000 and a fair value of $1,600,000. George advanced $1,600,000 to Jimmy, took ownership of the equipment and leased the equipment back to Jimmy. The term of the lease is 10 years and once Jimmy makes their last lease payment, the ownership of...
P4-37A Push-Down Accounting LO 4-7 On December 31, 20X6, Print Corporation and Size Company entered into...
P4-37A Push-Down Accounting LO 4-7 On December 31, 20X6, Print Corporation and Size Company entered into a business combination in which Print acquired all of Size’s common stock for $958,000. At the date of combination, Size had common stock outstanding with a par value of $118,000, additional paid in capital of $419,000, and retained earnings of $176,000. The fair values and book values of all Size’s assets and liabilities were equal at the date of combination, except for the following:...
Pam Corporation holds 70 percent ownership of Spray Enterprises. On December 31, 20X6, Spray paid Pam...
Pam Corporation holds 70 percent ownership of Spray Enterprises. On December 31, 20X6, Spray paid Pam $32,500 for a truck that Pam had purchased for $37,500 on January 1, 20X2. The truck was considered to have a 20-year life from January 1, 20X2, and no residual value. Both companies depreciate equipment using the straight-line method. Required: a. Prepare the worksheet consolidation entry or entries needed on December 31, 20X6, to remove the effects of the intercompany sale. (If no entry...
Pam Corporation holds 70 percent ownership of Northern Enterprises. On December 31, 20X6, Northern paid Pam...
Pam Corporation holds 70 percent ownership of Northern Enterprises. On December 31, 20X6, Northern paid Pam $28,000 for a truck that Pam had purchased for $33,000 on January 1, 20X2. The truck was considered to have a 20-year life from January 1, 20X2, and no residual value. Both companies depreciate equipment using the straight-line method. Required: a. Prepare the worksheet consolidation entry or entries needed on December 31, 20X6, to remove the effects of the intercompany sale. (If no entry...
Pam Corporation holds 70 percent ownership of Spray Enterprises. On December 31, 20X6, Spray paid Pam...
Pam Corporation holds 70 percent ownership of Spray Enterprises. On December 31, 20X6, Spray paid Pam $29,500 for a truck that Pam had purchased for $34,500 on January 1, 20X2. The truck was considered to have a 15-year life from January 1, 20X2, and no residual value. Both companies depreciate equipment using the straight-line method. Required: a. Prepare the worksheet consolidation entry or entries needed on December 31, 20X6, to remove the effects of the intercompany sale. (If no entry...
On the date of the business combination of Passman Corporation and Slago Company, the following working...
On the date of the business combination of Passman Corporation and Slago Company, the following working paper elimination was prepared (in journal entry format):                                     PASSMAN CORPORATION AND SUBSIDIARY             Working Paper Elimination             January 31, 2018 Common Stock                                     100,000 Additional Paid-in Capital                    200,000 Retained Earnings                                 300,000 Inventories- (first-in, first-out cost)    50,000 Plant Assets (net)                                150,000 Goodwill                                              40,000                             Investment in Slago Company                     840,000          Additional Information On January 31, 2018, the remaining economic life of Sago’s plant assets...
Let me know if the Adjusted trial balance on December 31, 20X6 is needed to answer...
Let me know if the Adjusted trial balance on December 31, 20X6 is needed to answer the below as I can provide it. Thank you! Questions 4 through 10 are based on the following December 31, 20X6 year-end account balances for XYZ Co. after adjusting entries had been prepared but before the books were closed for the year.                                                                  Cash……………..…………………………….250,000                 Accounts receivable…………………….……..680,000                 Marketable securities…………………………...60,000                 Prepaid insurance……………………………….35,000                 Prepaid rent….………………………………….30,000                 Office equipment…………………………….....620,000                 Accumulated depreciation: equipment………...200,000                 Land……………………………………………750,000                 Accounts payable………………………………306,000                 Dividends payable……………………………… 50,000                 Interest payable…………………………………......
Prepare the adjusted trial balance on December 31, 20X6. Attach your response in an excel or...
Prepare the adjusted trial balance on December 31, 20X6. Attach your response in an excel or word file. Questions 4 through 10 are based on the following December 31, 20X6 year-end account balances for XYZ Co. after adjusting entries had been prepared but before the books were closed for the year.                                                                  Cash……………..…………………………….250,000                 Accounts receivable…………………….……..680,000                 Marketable securities…………………………...60,000                 Prepaid insurance……………………………….35,000                 Prepaid rent….………………………………….30,000                 Office equipment…………………………….....620,000                 Accumulated depreciation: equipment………...200,000                 Land……………………………………………750,000                 Accounts payable………………………………306,000                 Dividends payable……………………………… 50,000                 Interest payable…………………………………... 8,750                 Income tax payable……………………………...30,000                 Unearned client service...
Pappy Corp and Sonny, Inc. have entered into negotiations leading to a possible business combination. As...
Pappy Corp and Sonny, Inc. have entered into negotiations leading to a possible business combination. As of December 31, 2017, Sonny, Inc. condensed balance sheet was as follows: Assets Cash 375,000 Receivables (net) 1,125,000 Inventories 1,687,500 Prepayments 675,000 Noncurrent assets 3,375,000 Total assets 7,237,500 Liabilities and stockholders' equity Current payables 3,000,000 Capital stock; (par value of 20) 1,000,000 Retained earnings 3,237,500 Total equities 7,237,500 Sonny, Inc.'s inventory has a fair value of $2,092,500, its noncurrent assets, net of depreciation, approximated...
Gazam  corporations adjusted trial balance at December 31, 20x6 included the following Cash                          &n
Gazam  corporations adjusted trial balance at December 31, 20x6 included the following Cash                                                                                        26,000 Account receivable                                                                 50,000 Allowance for doubtful account                                                                     5,000 Merchandise inventory                                                          41,000 Land                                                                                        50,000 Equipment                                                                              96,000 Accumulated depreciation                                                                             16,000 Account payable 115000 Income taxes payable                                                                                     5,000 Unearned rent                                                                                                15,000 Common stock ($10 par 10,000 shares)                                                       150,000 Retained earnings                                                                                           60,000 Sales                                                                                                                90,000 Interest revenue                                                                                             4,000 Cost of goods sold                                                                  90,000 Selling expense                                                                       30,000 Administrative expense                                                          40,000 Income tax expense                                                                12,000 Loss on sale...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT