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Peres Company purchases 80% of the common stock of Soap Company for $308,000.

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Question;On January 1, 2011, Peres Company purchases 80% of the common stock of Soap Company for $308,000. Soap has common stock, other paid-in capital in excess of par, and retained earnings of $50,000, $100,000, and $150,000, respectively. Net income and dividends for two year for Soap are as follows:Net income 2011 $60,000 2012 $90,000Dividends 2011 $20,000 2012 $30,000On January 1, 2011, the only undervalued tangible assets of Soap are inventory and the building. Inventory, for which is worth $25,000 more than book value, has a remaining life of 10 years, and straight-line depreciation is used. The remaining excess of cost over book value is attributed to goodwill. 1. Using this information and the information in the following trial balances on December 31, 2012, prepare a value analysis and determination and distribution of excess schedule:Inventory, December 31Peres Company 100,000Soap Company 50,000Other current assets Peres Company 148,000Soap Company 180,000Investment in Soap Company Peres Company 388,000Building and equipmentPeres Company 350,000Soap Company 320,000LandPeres Company 50,000Soap Company 50,000Accumulated depreciationPeres Company (100,000)Soap Company (60,000)Goodwill Peres Company Soap CompanyOther intangiblesPeres Company 20,000Current liabilities Peres Company (120,000)Soap Company ((40,000)Bonds payablePeres Company Soap Company (100,000)Other long term liabilitiesPeres Company (200,000)Common stock-Peres Company (200,000)Other paid-in capital in excess of par-Peres Company (100,000)Retained earnings -Peres company (214,000)Common stock-Soap Company (50,000)Other paid-in capital in excess of par-Soap Company (100,000)Retained earnings-Soap Company (190,000)Net salesPeres Company (520,000)Soap Company (450,000)Cost of goods soldPeres Company 300,000Soap Company 260,000Operating expensesPeres Company 120,000Soap Company 100,000Subsidiary incomePeres Company (72,000)Dividends declared-Peres Company 50,000Dividends declared- Soap Company 30,000Totals:Peres Company OSoap Company 02. Complete a worksheet for consolidated financial statements for 2012. Include columns for eliminations and adjustments, consolidated income, NCI, controlling retained earnings, and consolidated balance sheet.Problem 3-3The same as the previous problem except use the sophisticated equity method instead of the simple equity methodOn January 1 2011, the only undervalued tangible assets of Soap are inventory and the building. Inventory, for which FIFO is used, is worth $10,000 more than cost. The inventory is sold in 2011. The building, which is worth $25,000 more than book value, has a remaining life of 10 years, and straight-line depreciation is used. The remaining excess of cost over book value is attributable to goodwill. The Peres and Soap are as follows:Inventory, December 31 Peres Company 100,000Soap Company 50,000Other current assetsPeres Company 148,000Soap Company 180,000Investment in Soap Company Note 1LandPeres Company 50,000Soap Company 50,000Building and equipmentPeres Company 350,000Soap Company 320,000Accumulated depreciationPeres Company (100,000)Soap Company (60,000)Goodwill Peres CompanySoap CompanyOther intangiblesPeres Company 20,000Current liabilitiesPeres Company (120,000)Soap Company (40,000)Bonds payableSoap Company (100,000)Other long-term liabilitiesPeres Company (200,000)Common stock-Peres Company (200,000)Other paid-in capital in excess of par-Peres Company (100,000)Retained earnings-Peres Company (204,000)Common stock-Soap Company (50,000)Other paid-in capital in excess of par-Soap Company (100,000)Retained earnings-Soap Company (190,000)Net salesPeres Company (520,000)Soap Company (450,000)Cost of goods soldPeres Company 300,000Soap Company 260,000Operating expensesPeres Company 120,000Soap Company 100,000Subsidiary income Note 1Dividends declared-Peres Company 50,000Dividends declared-Soap Company 30,000Note1: To be calculated.1. Prepare a value analysis and determination and distribution of excess schedule2. Peres Company carries the investment in Soap Company under the sophisticated equity method. In general journal form, record the entries that would be made to the equity method in 2011 and 2012.3. Compute the balance that should appear in Investment in Soap Company and in Subsidiary Income on December 31, 2012 (the second year). Fill in these amounts on Peres Company's trial balance for 2012. 4. Complete a worksheet for consolidated financial statements for 2012. Include columns for eliminations and adjustments, consolidated income, NCI, controlling retained earnings, and consolidated balance sheet.Additional Requirements

 

Paper#43588 | Written in 18-Jul-2015

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