On January 1, 2013, Plano Company acquired 8 percent (16,000 shares) of the outstanding voting shares of the Sumter Company for $192,000, an amount equal to Sumter’s underlying book and fair value. Sumter declares and pays a cash dividend to its stockholders each year of $100,000 on September 15. Sumter reported net income of $300,000 in 2013, $360,000 in 2014, $400,000 in 2015, and $380,000 in 2016. Each income figure can be assumed to have been earned evenly throughout its respective year. In addition, the fair value of these 16,000 shares was indeterminate, and therefore the investment account remained at cost.

On January 1, 2015, Plano purchased an additional 32 percent (64,000 shares) of Sumter for $965,750 in cash and began to use the equity method. This price represented a $50,550 payment in excess of the book value of Sumter’s underlying net assets. Plano was willing to make this extra payment because of a recently developed patent held by Sumter with a 15-year remaining life. All other assets were considered appropriately valued on Sumter’s books.

On July 1, 2016, Plano sold 10 percent (20,000 shares) of Sumter’s outstanding shares for $425,000 in cash. Although it sold this interest, Plano maintained the ability to significantly influence Sumter’s decision-making process. Assume that Plano uses a weighted average costing system.

Prepare the journal entries for Plano for the years of 2013 through 2016.

Journal entries for several years. Includes conversion to equity method and a sale of a portion of the investment

On January 1, 2013, Plano Company acquired 8 percent (16,000 shares) of the outstanding voting shares of the Sumter Company for $192,000, an amount equal to Sumter’s underlying book and fair value. Sumter declares and pays a cash dividend to its stockholders each year of $100,000 on September 15. Sumter reported net income of $300,000 in 2013, $360,000 in 2014, $400,000 in 2015, and $380,000 in 2016. Each income figure can be assumed to have been earned evenly throughout its respective year. In addition, the fair value of these 16,000 shares was indeterminate, and therefore the investment account remained at cost.

On January 1, 2015, Plano purchased an additional 32 percent (64,000 shares) of Sumter for $965,750 in cash and began to use the equity method. This price represented a $50,550 payment in excess of the book value of Sumter’s underlying net assets. Plano was willing to make this extra payment because of a recently developed patent held by Sumter with a 15-year remaining life. All other assets were considered appropriately valued on Sumter’s books.

On July 1, 2016, Plano sold 10 percent (20,000 shares) of Sumter’s outstanding shares for $425,000 in cash. Although it sold this interest, Plano maintained the ability to significantly influence Sumter’s decision-making process. Assume that Plano uses a weighted average costing system.

Prepare the journal entries for Plano for the years of 2013 through 2016.

Journal entries for several years. Includes conversion to equity method and a sale of a portion of the investment

Question 15

Amos Company acquired land in exchange for 10,000 shares of its $10 par common stock. The fair market value of the land is NOT determinable, but the stock is widely traded and was selling for $25 per share when exchanged for the land. At what amount should the land be recorded by Amos Company?

Select one:

a. $150,000

b. $250,000

c. $350,000

d. $100,000

Question 16

A corporation purchases 10,000 shares of its own $20 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders' equity?

Select one:

a. increase, $200,000

b. increase, $350,000

c. decrease, $200,000

d. decrease, $350,000

Question 17

Which of the following is NOT a prerequisite to paying a cash dividend?

Select one:

a. formal action by the board of directors

b. market value in excess of par value per share

c. sufficient cash

d. sufficient retained earnings

Question 18

The liability for a dividend is recorded on which of the following dates?

Select one:

a. the date of record

b. the date of payment

c. the date of announcement

d. the date of declaration

Question 19

Tom owns 2,000 shares of common stock in Phillips, Inc. These shares represent a 5% interest in the company. If Phillips issues a 10% stock dividend (a) how many shares will Phillips own after the dividend, and (b) what percentage ownership will he have in the company?

Select one:

a. 2200 shares; 5% ownership

b. 2200 shares; 5.5% ownership

c. 2100; 5% ownership

d. 2100; 5.5% ownership

Question 20

What is the effect of a stock dividend on the Balance Sheet?

Select one:

a. Decrease total assets and decrease total stockholders’ equity

b. Decrease total assets and total increase stockholders’ equity

c. Increase total liabilities and decrease total stockholders’ equity

d. No effect on total assets, total liabilities or total stockholders’ equity

Q#9

On December 18, 2017, Stephanie Corporation acquired 100 percent of a Swiss company for 4.0 million Swiss francs (CHF), which is indicative of book and fair value. At the acquisition date, the exchange rate was $1.00 = CHF 1. On December 18, 2017, the book and fair values of the subsidiary’s assets and liabilities were:

Stephanie prepares consolidated financial statements on December 31, 2017. By that date, the Swiss franc has appreciated to $1.10 = CHF 1. Because of the year-end holidays, no transactions took place prior to consolidation.

Determine the translation adjustment to be reported on Stephanie’s December 31, 2017, consolidated balance sheet, assuming that the Swiss franc is the Swiss subsidiary’s functional currency. What is the economic relevance of this translation adjustment?

Determine the remeasurement gain or loss to be reported in Stephanie’s 2017 consolidated net income, assuming that the U.S. dollar is the functional currency. What is the economic relevance of this remeasurement gain or loss?

Please show your calculations, thanks.

Prime Corporation acquired 100 percent ownership of Steak Products Company on January 1, 20X1, for $250,000. On that date, Steak reported retained earnings of $70,000 and had $110,000 of common stock outstanding. Prime has used the equity-method in accounting for its investment in Steak.

The trial balances for the two companies on December 31, 20X5, appear below.

Additional Information:

1. On the date of combination (five years ago), the fair value of Steak’s depreciable assets was $70,000 more than the book value. Accumulated depreciation at that date was $10,000. The differential assigned to depreciable assets should be written off over the following 10-year period.
2. There was $20,000 of intercorporate receivables and payables at the end of 20X5.

Prepare all journal entries that Prime recorded during 20X5 related to its investment in Steak.

1A.Record Prime Corp's share of Steak Products' 20X5 income.

2B. Record Prime Corp's share of Steak Products' 20X5 dividend.

3C. Record the amortization of the excess acquisition price.

Prime Company holds 80 percent of Suspect Company’s stock, acquired on January 1, 20X2, for $182,000. On the acquisition date, the fair value of the noncontrolling interest was $45,500. Suspect reported retained earnings of $50,000 and had $100,000 of common stock outstanding. Prime uses the fully adjusted equity method in accounting for its investment in Suspect.

Trial balance data for the two companies on December 31, 20X6, are as follows:

Additional Information

1. At the date of combination, the book values and fair values of all separately identifiable assets and liabilities of Suspect were the same. At December 31, 20X6, the management of Prime reviewed the amount attributed to goodwill as a result of its purchase of Suspect stock and concluded an impairment loss of $20,475 should be recognized in 20X6 and shared proportionately between the controlling and noncontrolling shareholders.
2. On January 1, 20X5, Suspect sold land that had cost $8,000 to Prime for $18,000.
3. On January 1, 20X6, Prime sold to Suspect equipment that it had purchased for $82,500 on January 1, 20X1. The equipment has a total economic life of 15 years and was sold to Suspect for $71,000. Both companies use straight-line depreciation.
4. There was $4,000 of intercompany receivables and payables on December 31, 20X6.

Required:
a. Give all consolidation entries needed to prepare a consolidation worksheet for 20X6. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

b. Prepare a three-part worksheet for 20X6. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)

c. Prepare a consolidated balance sheet, income statement, and retained earnings statement for 20X6. (Be sure to list the assets and liabilities in order of their liquidity. Amount to be deducted should be indicated by a minus sign.)
  

Pepper Company acquired 80 percent of Salt Company's stock at underlying book value on January 1, 2018. At that date, Salt reported common stock outstanding of $1,050,000 and retained earnings of $840,000; the fair value of the noncontrolling interest was equal to 20 percent of the book value of Salt Company. Salt Co. sold equipment to Pepper Co. for a $720,000 on December 31, 2018. Salt Co. had originally purchased the equipment for $800,000 on January 1, 2015, with a useful life of 10 years and no salvage value. At the time of the purchase, Pepper Co. estimated that the equipment still had the same remaining useful life. Both companies use straight-line depreciation. Pepper sold land costing $132,000 to Salt Company on June 28, 2019, for $178,000.

a) Prepare Pepper’s journal entries related to intercompany sale of land and equipment for 2019.

b) Prepare the consolidation entries that related to intercompany sale of land for 2019.

c) Prepare the consolidation entries that related to intercompany sale of equipment for 2019.

On January 1, 2016, Monica Company acquired 70 percent of Young Company’s outstanding common stock for $658,000. The fair value of the noncontrolling interest at the acquisition date was $282,000. Young reported stockholders’ equity accounts on that date as follows: Common stock—$10 par value $ 300,000 Additional paid-in capital 40,000 Retained earnings 460,000 In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building (with a five-year remaining life) by $40,000. Any remaining excess acquisition-date fair value was allocated to a franchise agreement to be amortized over 10 years. During the subsequent years, Young sold Monica inventory at a 30 percent gross profit rate. Monica consistently resold this merchandise in the year of acquisition or in the period immediately following. Transfers for the three years after this business combination was created amounted to the following: Year Transfer Price Inventory Remaining at Year-End (at transfer price) 2016 $ 70,000 $ 15,000 2017 90,000 17,000 2018 100,000 23,000 In addition, Monica sold Young several pieces of fully depreciated equipment on January 1, 2017, for $41,000. The equipment had originally cost Monica $60,000. Young plans to depreciate these assets over a 5-year period. In 2018, Young earns a net income of $190,000 and declares and pays $50,000 in cash dividends. These figures increase the subsidiary's Retained Earnings to a $790,000 balance at the end of 2018. Monica employs the equity method of accounting. Hence, it reports $127,340 investment income for 2018 with an Investment account balance of $821,770. Under these circumstances, prepare the worksheet entries required for the consolidation of Monica Company and Young Company. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field

1

Prepare Entry *G to recognize upstream intra-entity inventory gross profit deferred from the previous year.

2

Prepare Entry *TA to return the equipment accounts to beginning book value based on historical cost.

3

Prepare Entry *C to adjust the parent retained earnings for the subsidiary's increase in book value.

4

Prepare Entry S to eliminate the stockholders' equity accounts of the subsidiary and recognize the noncontrolling interest.

5

Prepare Entry A to recognize the amount paid within acquisition price for buildings and the franchise agreement.

6

Prepare Entry I to eliminate the intra-entity income accrual.

7

Prepare Entry D to eliminate the intra-entity dividend transfers.

8

Prepare Entry E to remove the intra-entity inventory transfers made during the current year.

9

Prepare Entry TI to defer the intra-entity gross profit on the 2018 intra-entity inventory transfers.

10

Prepare Entry G to defer the intra-entity gross profit on the 2018 intra-entity inventory transfers.

11

Prepare Entry ED to remove the current year depreciation on the transferred item since its historical cost has been fully depreciated.

On January 1, 2016, Monica Company acquired 80 percent of Young Company’s outstanding common stock for $728,000. The fair value of the noncontrolling interest at the acquisition date was $182,000. Young reported stockholders’ equity accounts on that date as follows:

In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building (with a five-year remaining life) by $70,000. Any remaining excess acquisition-date fair value was allocated to a franchise agreement to be amortized over 10 years.

During the subsequent years, Young sold Monica inventory at a 30 percent gross profit rate. Monica consistently resold this merchandise in the year of acquisition or in the period immediately following. Transfers for the three years after this business combination was created amounted to the following:

In addition, Monica sold Young several pieces of fully depreciated equipment on January 1, 2017, for $38,000. The equipment had originally cost Monica $54,000. Young plans to depreciate these assets over a 5-year period.

In 2018, Young earns a net income of $160,000 and declares and pays $35,000 in cash dividends. These figures increase the subsidiary's Retained Earnings to a $760,000 balance at the end of 2018.

Monica employs the equity method of accounting. Hence, it reports $119,760 investment income for 2018 with an Investment account balance of $921,200. Under these circumstances, prepare the worksheet entries required for the consolidation of Monica Company and Young Company.

Parent Company acquired 25% of Son Inc. on January 1, 20X5 for $420,000. Son reported earning of $82,000 and declared dividends of $4,000 during 20X5, Parent determined the fair value of its shares in Son to be $450,000 at December 31, 20X5.

Based on the preceding information prepare the journal entries for 20X5 Parent will make to account for its investment in Son, if Parent uses the cost method of accounting for this investment.

Based on the preceding information prepare the journal entries for 20X5 Parent will make to account for its investment in Son, if Parent uses the equity method of accounting for this investment.

Based on the preceding information prepare the journal entries for 20X5 Parent will make to account for its investment in Son, if Parent uses the fair value method of accounting for this investment.