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Question;1. Account;balances are as of December 31, 20X3 except where noted.;SelectedIncome Statement Amounts;Pipe;Match;$710,000;$530,000;Sales;Cost of Goods Sold;490,000;370,000;Gain on Sale of Equipment;61,000;21,000;Earnings from Investment;in subsidiary;Interest Revenue;2,880;2,880;Interest Expense;25,000;Depreciation;20,000;SelectedBalance Sheet Amounts;{Debits/(Credits)};$ 50,000;$ 15,000;Cash;Notes Receivable;36,000;150,000;Inventories;229,000;Equipment;440,000;360,000;Accumulated Depreciation;(200,000);(120,000);Investment in Shaw;189,000;(36,000);Notes Payable;(100,000);Common Stock;(10,000);Additional paid-in-capital;(250,000);(40,000);Retained Earnings;(402,000);(140,000);SelectedStatement of Retained;Earnings Amounts;$ 272,000;$;100,000;Beginning Balance;December 31, x2;Net Income;210,000;70,000;Dividends Paid;80,000;30,000;Additional Information;On January;2, 20X3 Pipe purchased 90% of Match for $155,000. On that date Match's;shareholders' equity equaled $150,000 and the fair values of Match's assets and;liabilities equaled their carrying amounts. Excess, if any, is attributed to;patents and is amortized over 10 years.;On September 4, 20X3 Match paid cash;dividends of $30,000.;On January 3, 20X3 Match sold equipment with an original cost of;$30,000 and a carrying value of $15,000 to Pipe for $36,000. The equipment had;a remaining useful life of 3 years. Straight-line depreciation is used.;On January;4, 20X3 Match signed an 8% Note Payable. All interest payments were made as of;December 31, 20X3.;During the year Match sold merchandise to Pipe for $60,000;which included a profit of $20,000. At year end 50% of the merchandise remained;in Pipe's inventory.;4-7;Chapter;4;Required;1.;Which method is Pipe using to account for the;investment in Match? How do you know?;2.;What elimination entry(ies) are associated with the;elimination of intercompany profits due to the sale of merchandise?;3.;What elimination entry(ies) are necessary with the;sale of equipment by Match to Pipe?;4.;What elimination entry(ies) are associated with the;note to Match? Why are the entry(ies) made?;Chapter 4;2.;On January 1, 20X1, Prange Company acquired 100% of;the common stock of Seaman Company for $600,000. On this date Seaman had total;owners' equity of $400,000. Any excess of cost over book value is attributable;to a patent, which is to be amortized over 10 years.;During 20X1 and 20X2, Prange has appropriately accounted for its;investment in Seaman using the simple equity method.;On January;1, 20X2, Prange held merchandise acquired from Seaman for $30,000. During 20X2;Seaman sold merchandise to Prange for $100,000, of which $20,000 is held by;Prange on December 31, 20X2. Seaman's gross profit on all sales is 40%.;On December 31, 20X2, Prange still owes Seaman $20,000 for;merchandise acquired in December.;Required;Complete the Figure 4-1 worksheet for consolidated financial;statements for the year ended December 31, 20X2.;3.;On January 1, 20X1, Prange Company acquired 80% of;the common stock of Seaman Company for $500,000. On this date Seaman had total;owners' equity of $400,000. Any excess of cost over book value is attributable;to patent, which is to be amortized over 20 years.;During 20X1 and 20X2, Prange has appropriately accounted for its;investment in Seaman using the simple equity method.;On January;1, 20X2, Prange held merchandise acquired from Seaman for $30,000. During 20X2;Seaman sold merchandise to Prange for $100,000, of which $20,000 is held by;Prange on December 31, 20X2. Seaman's gross profit on all sales is 40%.;On December 31, 20X2, Prange still owes Seaman $20,000 for;merchandise acquired in December.;Required;Complete the Figure 4-2 worksheet for consolidated financial;statements for the year ended December 31, 20X2.;4-10;Chapter 4;4.;Selected information from the separate and;consolidated balance sheets and income statements of Palo Alto, Inc. and its;subsidiary, Stanford Co., as of December 31, 20X1, and for the year then ended;is as follows;Palo Alto;Stanford;Consoli-;Balance sheet accounts;dated;$ 26,000;$19,000;$;42,000;Accounts;receivable............;Inventory......................;30,000;25,000;50,000;Investment;in Stanford.........;67,000;--;--;Goodwill.......................;--;--;30,000;Noncontrolling;interest........;--;--;10,000;Stockholders;equity...........;154,000;50,000;154,000;Income statement accounts;$200,000;$140,000;$300,000;Revenues.......................;Cost;of goods sold.............;150,000;110,000;225,000;Gross profit.................;50,000;30,000;75,000;Equity in earnings of Stanford.;$9,000;--;--;Net;income.....................;$36,000;$20,000;$36,000;Additional information;During;20X1, Palo Alto sold goods to Stanford at the same markup on cost that Palo;Alto uses for all sales. At December 31, 20X1, Stanford had not paid for all of;these goods and still held 50% of them in inventory.;Palo Alto;acquired its interest in Stanford five years earlier (as of December 31, 20X1.);Required;For each of the following items, calculate;the required amount.;a. The amount;of intercompany sales from Palo Alto to Stanford during 20X1.;b. The amount;of Stanford's payable to Palo Alto for intercompany sales as of December 31;20X1.;c. In Palo;Alto's December 31, 20X1, consolidated balance sheet, the carrying amount of;the inventory that Stanford purchased from Palo Alto.;d. The percent;of noncontrolling interest ownership in Stanford as of December 31, 20X1.;4-12;Chapter 4;5.;On January 1, 20X1, Pinto Company purchased an 80%;interest in Sands Inc. for $1,000,000. The equity balances of Sands at the time;of the purchase were as follows;Common stock ($10;par).................................;$100,000;Paid-in;capital in excess of par.......................;400,000;Retained;earnings......................................;500,000;Any excess of cost over book value is;attributable to goodwill.;No;dividends were paid by either firm during 20X6. The following trial balances;were prepared for Pinto Company and its subsidiary, Sands Inc., on December 31;20X6:......................................;Cash;Pinto;Sands;$;120,000;$;62,000;Accounts;receivable.......................;290,000;194,000;Inventory.................................;350,000;176,000;Land......................................;800,000;180,000;Buildings and;equipment...................;1,100,000;800,000;Accumulated;depreciation..................;(180,000);(120,000);Investment in;Sands.......................;600,000;-;Accounts payable..........................;(110,000);(50,000);Common stock, $10;par.....................;(800,000);(100,000);Paid-in capital in;excess of par..........;(660,000);(400,000);Retained;earnings.........................;(1,340,000);(650,000);Sales.....................................;(600,000);(300,000);Other;income..............................;(40,000);(12,000);Cost of goods;sold........................;320,000;180,000;Other expenses............................;150,000;32,000...................................Total;0;0;===========;=========;Sands sold;a machine to Pinto Company for $40,000 on January 1, 20X6. The machine cost;Sands $50,000, and $25,000 of accumulated depreciation had been recorded as of;the sale date. The machine had a 5-year remaining life and no salvage value.;Pinto Company is using straight-line depreciation.;Since the;purchase date, Pinto has sold merchandise for resale to Sands, Inc. at a;mark-up on cost of 25%. Sales during 20X6 were $150,000. The inventory of these;goods held by Sands was $15,000 on January 1, 20X6, and $18,000 on December 31;20X6.;Required;Prepare a;consolidated income statement for 20X6, including income distribution schedules;to support your distribution of income to the Noncontrolling and controlling;interest accounts.;4-13;Chapter;4

 

Paper#44362 | Written in 18-Jul-2015

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