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Question;12.;On January 1, 20X7, Parent Company acquired 100% of;the common stock of Subsidiary Company for $365,000. On this date, Subsidiary;had common stock, other paid in capital, and retained earnings of $50,000;$100,000, and $200,000 respectively.;In 20X7, 20X8, and 20X9, Parent has accounted for the Investment;in Subsidiary using the simple equity method.;On January;1, 20X8, Parent purchased equipment for $174,120 and immediately leased the;equipment to Subsidiary on a 4-year lease. The transaction was legally;structured as a sales-type lease with a present value for the minimum lease;payments of $204,120. Parent recorded the following entry;Minimum Lease Payments;Receivable..........;$240,000;Unearned Interest Income.................;$ 35,880;Equipment................................;174,120;Sales Profit;on Lease....................;30,000;The minimum;lease payments of $60,000 are to be made annually on January 1, beginning;immediately, for a total of 4 payments. The implicit interest rate is 12%. The;lease provides for an automatic transfer of title at the end of 4 years. The;estimated useful life of the equipment is 6 years. The lease has been;capitalized by both companies.;A lease;amortization schedule, applicable to either company, is presented below;Carrying;Carrying;Interest;Interest;Payment;Principal;Value on;Value;Rate;Reduction;1-1-X8;$204,120;1-1-X8;- 60,000;12%;$17,294;$60,000;$42,706;144,120;1-1-X9;- 42,706;12%;12,170;60,000;47,830;101,414;1-1-Y0;- 47,830;12%;6,416*;60,000;53,584;53,584;1-1-Y1;- 53,584;*Adjusted for;rounding error.;$;0;========;Required;Complete;the Figure 5-11 worksheet for consolidated financial statements for the year;ended December 31, 20X8. Round all computations to the nearest dollar.;5-26;5-27;Chapter 5;13.;On January 1, 20X7, Parent Company purchased 100% of;the common stock of Subsidiary Company for $390,000. On this date, Subsidiary;had common stock, other paid in capital, and retained earnings of $50,000;$100,000, and $200,000 respectively.;Any;excess of cost over book value is due to goodwill.;In both 20X7, 20X8, and 20X9, Parent has accounted for the;Investment in Subsidiary using the simple equity method.;On January;1, 20X8, Parent purchased equipment for $204,120 and immediately leased the;equipment to Subsidiary on a 4-year lease. The minimum lease payments of;$60,000 are to be made annually on January 1, beginning immediately, for a;total of 4 payments. The implicit interest rate is 12%. The lease provides for;an automatic transfer of title at the end of 4 years. The estimated useful life;of the equipment is 6 years. The lease has been capitalized by both companies.;A lease;amortization schedule, applicable to either company, is presented below;Carrying;Carrying;Interest;Interest;Payment;Principal;Value on;Value;Rate;Reduction;1-1-X8;$204,120;1-1-X8;- 60,000;12%;$17,294;$60,000;$42,706;144,120;1-1-X9;- 42,706;12%;12,170;60,000;47,830;101,414;1-1-Y0;- 47,830;12%;6,416*;60,000;53,584;53,584;1-1-Y1;- 53,584;*Adjusted;for rounding error.;$;0;========;On January;1, 20X9, Parent held merchandise acquired from Subsidiary for $10,000. During;20X9, subsidiary sold merchandise to Parent for $50,000, of which $15,000 is;held by Parent on December 31, 20X9. Subsidiary's usual gross profit on;affiliated sales is 40%.;Required;Complete;the Figure 5-12 worksheet for consolidated financial statements for the year;ended December 31, 20X9. Round all computations to the nearest dollar.;5-28;Chapter 5;5-29;Chapter 5;14.;On January 1, 20X7, Porter Company purchased 80% of;the common stock of Singer Company for $372,000. On this date Singer had total;owners' equity of $440,000.;Any;excess of cost over book value is due to goodwill.;During 20X7 and 20X8, Porter has appropriately accounted for its;investment in Singer using the simple equity method.;On January;1, 20X8, Porter held merchandise acquired from Singer for $30,000. During 20X8;Singer sold merchandise to Porter for $90,000, of which $20,000 is held by;Porter on December 31, 20X2. Singer's usual gross profit on affiliated sales is;40%.;On December 31, 20X8, Porter still owes Singer $10,000 for;merchandise acquired in December.;On December;31, 20X7, Porter sold $100,000 par value of 10%, 10-year bonds for $102,000.;Porter uses the straight-line method of amortization for the premium. The bonds;pay interest semiannually on June 30 and December 31.;On December 31, 20X8, Singer repurchased $50,000 par value of;the bonds, paying $49,100. Straight-line amortization is used.;Required;Complete;the Figure 5-13 worksheet for consolidated financial statements for the year;ended December 31, 20X8. Round all computations to the nearest dollar.;5-30;Chapter 5;5-31;Chapter 5;11.;On January 1, 20X7, Porter Company purchased 80% of;the common stock of Singer Company for $372,000. On this date Singer had total;owners' equity of $440,000.;Any;excess of cost over book value is due to goodwill.;During 20X7, 20X8, and 20X9, Porter has appropriately accounted;for its investment in Singer using the simple equity method.;On January;1, 20X9, Porter held merchandise acquired from Singer for $40,000. During 20X9;Singer sold merchandise to Porter for $120,000, of which $10,000 is held by;Porter on December 31, 20X9. Singer's usual gross profit on affiliated sales is;40%.;On December 31, 20X9, Porter still owes Singer $5,000 for;merchandise acquired in December.;On December;31, 20X7, Porter sold $100,000 par value of 10%, 10-year bonds for $102,000.;Porter uses the straight-line method of amortization for the premium. The bonds;pay interest semi-annually on June 30 and December 31.;On December 31, 20X8, Singer repurchased $50,000 par value of;the bonds, paying $49,100. Singer uses the straight-line method of amortization;for the discount. The bonds are still held on December 31, 20X9.;Required;Complete;the Figure 5-14 worksheet for consolidated financial statements for the year;ended December 31, 20X9. Round all computations to the nearest dollar.;5-32;Chapter 5;5-33;Chapter 5;16.;On January 1, 20X7, Porter Company purchased 80% of;the common stock of Singer Company for $372,000. On this date Singer had total;owners' equity of $440,000.;Any;excess of cost over book value is due to goodwill.;During 20X7, 20X8, and 20X9, Porter has appropriately accounted;for its investment in Singer using the simple equity method.;On January;1, 20X9, Porter held merchandise acquired from Singer for $40,000. During 20X9;Singer sold merchandise to Porter for $120,000, of which $10,000 is held by;Porter on December 31, 20X9. Singer's usual gross profit on affiliated sales is;40%;On December 31, 20X9, Porter still owes Singer $5,000 for;merchandise acquired in December;On December;31, 20X7, Porter sold $100,000 par value of 10%, 10-year bonds for $102,000.;Porter uses the straight-line method of amortization for the premium. The bonds;pay interest semi-annually on June 30 and December 31.;On December 31, 20X8, Singer repurchased $50,000 par value of;the bonds, paying $49,100. Singer uses the straight-line method of amortization;for the discount. The bonds are still held on December 31, 20X9.;Required;Complete;the Figure 5-15 worksheet for consolidated financial statements for the year;ended December 31, 20X9. Round all computations to the nearest dollar.;5-34;Chapter 5

 

Paper#44370 | Written in 18-Jul-2015

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