Herbert, Inc., acquired all of Rambis Company’s outstanding stock on January 1, 2017, for $638,000 in cash. Annual excess amortization of $20,000 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $405,000, and Rambis reported a $252,000 balance. Herbert reported internal net income of $40,500 in 2017 and $52,300 in 2018 and declared $10,000 in dividends each year. Rambis reported net income of $29,500 in 2017 and $41,300 in 2018 and declared $5,000 in dividends each year.

a. Assume that Herbert’s internal net income figures above do not include any income from the subsidiary.

If the parent uses the equity method, what is the amount reported as consolidated retained earnings on December 31, 2018?

What would be the amount of consolidated retained earnings on December 31, 2018, if the parent had applied either the initial value or partial equity method for internal accounting purposes?

b. Under each of the following situations, what is the Investment in Rambis account balance on Herbert’s books on January 1, 2018?

The parent uses the equity method.

The parent uses the partial equity method.

The parent uses the initial value method.

c. Under each of the following situations, what is Entry *C on a 2018 consolidation worksheet?

The parent uses the equity method.

The parent uses the partial equity method.

The parent uses the initial value method.

Herbert, Inc., acquired all of Rambis Company’s outstanding stock on January 1, 2017, for $638,000 in cash. Annual excess amortization of $20,000 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $405,000, and Rambis reported a $252,000 balance. Herbert reported internal net income of $40,500 in 2017 and $52,300 in 2018 and declared $10,000 in dividends each year. Rambis reported net income of $29,500 in 2017 and $41,300 in 2018 and declared $5,000 in dividends each year.

a. Assume that Herbert’s internal net income figures above do not include any income from the subsidiary.

If the parent uses the equity method, what is the amount reported as consolidated retained earnings on December 31, 2018?

What would be the amount of consolidated retained earnings on December 31, 2018, if the parent had applied either the initial value or partial equity method for internal accounting purposes?

b. Under each of the following situations, what is the Investment in Rambis account balance on Herbert’s books on January 1, 2018?

The parent uses the equity method.

The parent uses the partial equity method.

The parent uses the initial value method.

c. Under each of the following situations, what is Entry *C on a 2018 consolidation worksheet?

The parent uses the equity method.

The parent uses the partial equity method.

The parent uses the initial value method.

1. Prepare the Adjusting Journal Entries (AJEs) that should be made on December 31, 2018, the end of the accounting year, for each of the following independent situations. If no AJE is required, indicate “none.” Assume the firm only makes AJEs at the end of the accounting year.

1. On March 31, 2018, the firm collected $12,000 of rent for 12 months in advance. The journal entry to record the receipt included a credit to a temporary account.

Revenue (3*1,000)                   3,000

Unearned                                             3,000

2. On May 1, 2018, the firm collected $6,000 of rent for 12 months in advance. The journal entry to record the receipt included a credit to a balance sheet account.

Unearned (8*500)                    4,000

Revenue                                              4,000

3. On September 30, 2018, the firm collected $7,500 of rent for 3 months in advance. The journal entry to record the receipt included a credit to an income statement account.

None

4. On June 1, 2018, the firm collected $3,000 of rent for 3 months in advance. The journal entry to record the receipt included a credit to a permanent account.

none

5. On August 1, 2018, the firm paid $60,000 for a 6-month insurance policy. The journal entry to record the payment included a debit to a balance sheet account.

Expense (5*10,000)                 50,000

Prepaid                                                50,000

6. On September 1, 2018, the firm paid $15,000 for a 3-month rental of a machine. The journal entry to record the payment included a debit to a balance sheet account.

None

7. On February 1, 2018, the firm paid $6,000 for a 6-month rental of a machine. The journal entry to record the payment included a debit to an income statement account.

None

8. On October 1, 2018, the firm paid $80,000 for an 8-month rental of a machine. The journal entry to record the payment included a debit to a temporary account.

1. On May 1, 2018, the company borrowed $1,200,000 at 4%. The principle is due on May 1, 2019. The interest is due every six months and the company made the first interest payment on November 1, 2018.

Expense (1,200,000*4%*2/12)               8,000

Payable                                                                 8,000

10. On August 31, 2015, the company borrowed $6,000,000 for six years at 6%. The interest is due and payable every year on August 31. The principle is due and payable in three equal installments on August 31, 2017, August 31, 2019, and August 31, 2021. The company made its interest and principle payments as required.

Expense (2,000,000*6%*4/12)               40,000

Payable                                                                 40,000

11. On September 1, 2018, the firm bought $100,000 of 3%, three-year bonds. The firm paid $100,000 for this investment. The company will collect $1,500 of interest on the bonds every six months starting on March 1, 2019.

Receivable (100,000*3%*4/12)              1,000

Revenue                                                       1,000

kindly verify my answers and correct if wrong

Question 1

Always Fit Company is engaged in providing group fitness classes in a studio. Customers are required to purchase group classes coupons in advance. Coupons are redeemed when customers attend fitness classes. Adjusting entries are performed on a monthly basis. Closing entries are performed annually on December 31. Below is the Company’s unadjusted trial balance at the year ended December 31, 2018.


Always Fit Company Unadjusted Trial Balance December 31, 2018 Account Title Debit $ Credit $ Cash 114,400 Accounts receivable 220,100 Unexpired insurance 36,000 Supplies 6,500 Equipment 120,000 Accumulated depreciation: Equipment 21,200 Accounts payable 24,000 Income taxes payable 9,100 Unearned revenue 21,000 8% Notes payable 42,000 Share capital (100,000 shares) 200,000 Retained earnings 77,000 Services revenue 304,000 Wages expense 50,000 Rent expense 91,000 Insurance expense 12,000 Depreciation expense 18,000 Supplies expense 3,000 Income taxes expense 27,300 $698,300 $698,300
  

Information on adjusting entries:

(1) The estimated useful life of equipment is five years and straight-line depreciation method is adopted. Depreciation expense had been updated to end of September 2018.

(2) Accrued, but unrecorded and unpaid wages amounted to $7,000.

(3) On November 1, 2018, the company borrowed $42,000 from its owner by signing 9-month note at 8% interest rate per annum. The monthly interests were paid by the company at the end of the next months. No entries had been made after recording the note.

(4) Physical count shows supplies on hand were $6,000 on December 31, 2018.

(5) On August 1, 2018, the company prepaid a 12-month insurance policy, which was effective on September 1, 2018.

(6) On December 31, 2018, the Company declared a cash dividend of $0.10 per share to be paid in the following year.

(7) Group class coupons amounting $8,000 were redeemed in December, 2018.

(8) The Company estimated that the income taxes expense for the entire year was $30,300, which to be paid next year.

(9) Unrecorded and unpaid fuel expenses of the owner’s private vehicle amounted to $2,000.


Required:

(a) Prepare the necessary adjusting journal entries on December 31, 2018 so as to bring the financial records of Always Fit Company up-to-date. Workings are required, but explanations are NOT required. If no adjusting entries are required, state “No entry” and name the accounting principle applied.

(b) Prepare the income statement of the Company for the year ended December 31, 2018, showing breakdown of items under the captions of Total Revenues, Total Expenses, Profit before Tax, Profit after Tax.

(c) Prepare the statement of financial position as of December 31, 2018, showing breakdown of items under the captions of Total Assets, Total Liabilities, Total Shareholder’s Equity and Total Liabilities & Shareholders’ Equity.

Problem 24-3

Metlock Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Metlock and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2018, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $34,960 notes, which are due on June 30, 2018, and September 30, 2018. Another note of $6,030 is due on March 31, 2019, but he expects no difficulty in paying this note on its due date. Brown explained that Metlock’s cash flow problems are due primarily to the company’s desire to finance a $299,210 plant expansion over the next 2 fiscal years through internally generated funds.

The commercial loan officer of Topeka National Bank requested the following financial reports for the last 2 fiscal years.

(a) Compute the following items for Metlock Corporation. (Round answer to 2 decimal places, e.g. 2.25 or 2.25%.)

In the presence of non-controlling interests, if dividends are declared by a subsidiary and by a parent entity, which dividends payable will be shown in the consolidated balance sheet?

List the four non-income determinants of consumption and spending

Explain 5 non-monetary motivation for an Indonesian employee?