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ACC Problem 8-4 (LO 2) Worksheet, subsidiary stock sale with parent purchase,

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Question;Problem 8-4 (LO 2) Worksheet;subsidiary stock sale with parent purchase;Inter-company merchandise. On January 1, 2012;Mitta Corporation acquires a 60% interest (12,000 shares) in Train Company for;$156,000. Train stockholders? equity on the purchase date is as follows;Common stock ($5par)...........................;$100,000;Paid-incapital in excess of par.....................;50,000;Retained earnings...............................;80,000;Total stockholders? equity........................;$230,000;At the purchase date, Train?s book;values for assets and liabilities closely approximate fair values. Any excess;of cost over book value is attributed to goodwill.;On January 1, 2013, Train Company sells;5,000 shares of common stock in a public offering at $20 per share. Mitta;Corporation purchases 4,000 shares.;During 2013, Mitta sells $30,000 of;goods to Train at a gross pro?t of 25%. There are;$6,000 of Mitta goods in Train?s;beginning inventory and $8,000 of Mitta goods in Train?s ending inventory.;Merchandise sales by Train to Mitta are;$20,000 during 2013 at a gross pro?t of 30%.;There;are $6,000 of Train goods in Mitta?s beginning inventory and $2,000 of Train;goods in Mitta?s ending inventory.;Intercompany gross pro?t rates have;been constant for many years. There are no intercompany payables/receivables.;Mitta?s investment in Train Company;balance is determined as follows;Original cost............................................................ $156,000;60%of Train 2012 income ($40,000;60%).......................... 24,000;Subtotal.............................................................. $180,000;Less60%ofTrain dividends declared;in2012(60% $8,000)........ (4,800);Subtotal.............................................................. $175,200;Cost to acquire additional shares (new;issue)................................... 80,000;64%ofTrain 2013income ($50,000;?64%)..................................;32,000;Subtotal.............................................................. $287,200;Less64%ofTrain dividends declared;in2013(64% ?$10,000)................... (6,400);Investment balance, December31,2013....................................;$280,800;The trial balances of the two companies;as of December 31, 2013, are as follows;Mitta;Train;Corporation;Company;Cash....................................................;106,200;63,500;Accounts Receivable........................................;113,600;60,000;Inventory.................................................;350,000;80,000;InvestmentinTrain Company................................280,800;Property,Plant, andEquipment..............................;1,800,000 360,000;Accumulated Depreciation..................................;(600,000);(89,500);Accounts Payable..........................................;(180,000);(64,000);Other CurrentLiabilities.....................................;(26,000) (8,000);BondsPayable.............................................;(500,000);Mitta;Train;Corporation Company;Company;CommonStock($10 par).................................... (1,000,000);CommonStock($5par).....................................;(125,000);Paid-In Capital inExcess ofPar..............................(125,000);Retained Earnings,January;1,2013..........................;(212,600);(112,000);Sales.................................................... (1,950,000);(600,000);Subsidiary Income..........................................;(32,000);Costof GoodsSold.........................................;1,170,000;420,000;Other Expenses............................................;630,000;130,000;Dividends Declared.........................................;50,000;10,000;Totals..................................................;0;0;Prepare the worksheet necessary to;produce the consolidated?nancial statements of Mitta Corporation and its;subsidiary as of December 31, 2013. Include the determination and distribution;of excess and income distribution schedule.

 

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