Question 1

P Co obtained control through acquiring ownership interest of 90% in X Co on 1 January 20x3.

On acquisition date, the fair value of fixed assets of X Co was $950,000 while the book value of fixed assets was $800,000. Fixed assets had a useful life of eight years as at the date of acquisition. The fixed assets were disposed at a price of $250,000 to third parties on 1 January 20x6.

Fair value of non-controlling interests of X Co as at acquisition date was $360,000. The financial statements for the year ended 31 December 20x6 are shown below.

Assume a tax rate of 20%. Recognize tax on fair value adjustments.

Required

1. Prepare consolidation and equity accounting entries for the year ended 31 December 20x6.

2. Perform an analytical check of the balance in Non-controlling Interests as at 31 December 20x6, showing the workings clearly.

Bank Reconciliation and Entries

The cash account for Brentwood Bike Co. at May 1 indicated a balance of $14,950. During May, the total cash deposited was $74,930 and checks written totaled $69,570. The bank statement indicated a balance of $25,400 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:

Checks outstanding totaled $11,310.

A deposit of $9,220, representing receipts of May 31, had been made too late to appear on the bank statement.

The bank had collected for Brentwood Bike Co. $4,870 on a note left for collection. The face of the note was $4,500.

A check for $270 returned with the statement had been incorrectly charged by the bank as $720.

A check for $630 returned with the statement had been recorded by Brentwood Bike Co. as $360. The check was for the payment of an obligation to Adkins Co. on account.

Bank service charges for May amounted to $30.

A check for $1,120 from Jennings Co. was returned by the bank because of insufficient funds.

Instructions:

1. Prepare a bank reconciliation as of May 31.

2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound transaction, if an amount box does not require an entry, leave it blank.

3. If a balance sheet were prepared for Brentwood Bike Co. on May 31, what amount should be reported as cash?
$

Prepare journal entries to record the following merchandising transactions of Cabela’s, which uses the perpetual inventory system and the gross method. (Hint: It will help to identify each receivable and payable; for example, record the purchase on July 1 in Accounts Payable—Boden.) July 1 Purchased merchandise from Boden Company for $6,200 under credit terms of 2/15, n/30, FOB shipping point, invoice dated July 1. 2 Sold merchandise to Creek Co. for $950 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 2. The merchandise had cost $517. 3 Paid $110 cash for freight charges on the purchase of July 1. 8 Sold merchandise that had cost $1,500 for $1,900 cash. 9 Purchased merchandise from Leight Co. for $2,500 under credit terms of 2/15, n/60, FOB destination, invoice dated July 9. 11 Received a $500 credit memorandum from Leight Co. for the return of part of the merchandise purchased on July 9. 12 Received the balance due from Creek Co. for the invoice dated July 2, net of the discount. 16 Paid the balance due to Boden Company within the discount period. 19 Sold merchandise that cost $1,000 to Art Co. for $1,500 under credit terms of 2/15, n/60, FOB shipping point, invoice dated July 19. 21 Issued a $250 credit memorandum to Art Co. for an allowance on goods sold on July 19. 24 Paid Leight Co. the balance due, net of discount. 30 Received the balance due from Art Co. for the invoice dated July 19, net of discount. 31 Sold merchandise that cost $5,000 to Creek Co. for $7,400 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 31.

Sales-Related and Purchase-Related Transactions Using Perpetual Inventory System

The following were selected from among the transactions completed by Babcock Company during November of the current year:

Required:

Journalize the transactions.

Sales-Related and Purchase-Related Transactions Using Periodic Inventory System

The following were selected from among the transactions completed by Essex Company during July of the current year:

Required:

Journalize the entries to record the transactions of Essex Company for July using the periodic inventory system.

For a compound transaction, if an amount box does not require an entry, leave it blank.

Sales-Related and Purchase-Related Transactions Using Perpetual Inventory System

The following were selected from among the transactions completed by Babcock Company during November of the current year:

Required:

Journalize the transactions.

Prepare journal entries to record the following merchandising transactions of Cabela’s, which uses the perpetual inventory system and the gross method. (Hint: It will help to identify each receivable and pay- able; for example, record the purchase on July 1 in Accounts Payable—Boden.) July 1 Purchased merchandise from Boden Company for $6,000 under credit terms of 1∕15, n∕30, FOB shipping point, invoice dated July 1. 2 Sold merchandise to Creek Co. for $900 under credit terms of 2∕10, n∕60, FOB shipping point, invoice dated July 2. The merchandise had cost $500. 3 Paid $125 cash for freight charges on the purchase of July 1. 8 Sold merchandise that had cost $1,300 for $1,700 cash. 9 Purchased merchandise from Leight Co. for $2,200 under credit terms of 2∕15, n∕60, FOB destination, invoice dated July 9. 11 Received a $200 credit memorandum from Leight Co. for the return of part of the merchandise purchased on July 9. 12 Received the balance due from Creek Co. for the invoice dated July 2, net of the discount. 16 Paid the balance due to Boden Company within the discount period. 19 Sold merchandise that cost $800 to Art Co. for $1,200 under credit terms of 2∕15, n∕60, FOB shipping point, invoice dated July 19. 21 Issued a $100 credit memorandum to Art Co. for an allowance on goods sold on July 19. 24 Paid Leight Co. the balance due, net of discount. 30 Received the balance due from Art Co. for the invoice dated July 19, net of discount. 31 Sold merchandise that cost $4,800 to Creek Co. for $7,000 under credit terms of 2∕10, n∕60, FOB shipping point, invoice dated July 31.

Prepare journal entries to record the following merchandising transactions of Cabela’s, which applies the perpetual inventory system and the gross method. (Hint: It will help to identify each receivable and payable; for example, record the purchase on July 1 in Accounts Payable—Boden.)

July 1 Purchased merchandise from Boden Company for $6,400 under credit terms of 2/15, n/30, FOB shipping point, invoice dated July 1.

2 Sold merchandise to Creek Co. for $950 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 2. The merchandise had cost $533.

3 Paid $105 cash for freight charges on the purchase of July 1.

8 Sold merchandise that had cost $1,700 for $2,100 cash.

9 Purchased merchandise from Leight Co. for $2,900 under credit terms of 2/15, n/60, FOB destination, invoice dated July 9.

11 Received a $900 credit memorandum from Leight Co. for the return of part of the merchandise purchased on July 9.

12 Received the balance due from Creek Co. for the invoice dated July 2, net of the discount.

16 Paid the balance due to Boden Company within the discount period.

19 Sold merchandise that cost $1,000 to Art Co. for $1,500 under credit terms of 2/15, n/60, FOB shipping point, invoice dated July 19.

21 Issued a $250 credit memorandum to Art Co. for an allowance on goods sold on July 19.

24 Paid Leight Co. the balance due, net of discount. 30 Received the balance due from Art Co. for the invoice dated July 19, net of discount.

31 Sold merchandise that cost $5,200 to Creek Co. for $7,300 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 31.

Prepare journal entries to record the following merchandising transactions of Cabela’s, which uses the perpetual inventory system and the gross method. (Hint: It will help to identify each receivable and payable; for example, record the purchase on July 1 in Accounts Payable—Boden.)

The following items were selected from among the transactions completed by O’Donnel Co. during the current year: