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Question;8.;On January 1, 20X1, Patrick Company purchased 60% of;the common stock of Solomon Company for $200,000. On this date, Solomon had;common stock, other paid-in capital, and retained earnings of $20,000, $60,000;and $120,000 respectively.;On January;1, 20X1, the only tangible asset of Solomon which was undervalued was a;long-term investment, which was worth $15,000 more than book value.;On July 1, 20X2, Patrick Company purchased an additional 30% of;the common stock of Solomon Company for $140,000.;On July 1, 20X2, the long-term investment was undervalued by;$20,000 and any remaining excess of cost over book value was due to goodwill.;Net;income and dividends for 2 years for Solomon Company were:..................;Net income for year;20X1;20X2;$60,000;$96,000;Dividends, paid-in December..........;0;50,000;In 20X2;the net income of Solomon for the first half of the year was $50,000.;In both;20X1 and 20X2, Patrick has accounted for its investment in Solomon using the;simple equity method.;In the last quarter of 20X2, Solomon sold $80,000 of goods to;Patrick, at a gross profit rate of 30%. On December 31, 20X2, $20,000 of these;goods are in Patrick's ending inventory.;Required;a.;Using the information above or on the separate;worksheet, prepare determination and distribution of excess schedules for the;two purchases. Use the Patrick company concept (prorata market value approach);in any write-up of assets.;b. Complete;the Figure 7-3 worksheet for consolidated financial statements for 20X2.;7-20;Chapter 7;7-21;Chapter 7;9.;On January 1, 20X1, Parent Company purchased 60% of;the common stock of Subsidiary Company for $177,000. On this date, Subsidiary;had common stock, other paid-in capital, and retained earnings of $20,000;$80,000, and $150,000 respectively.;On January 1, 20X1, the only tangible asset of Subsidiary which;was undervalued was a long-term investment, which was worth $15,000 more than;book value.;On July 1, 20X2, Parent Company purchased an additional 30% of;the common stock of Subsidiary Company for $117,000.;On July 1, 20X2, the long-term investment was undervalued by;$20,000 and any remaining excess of cost over book value was due to goodwill.;On December;31, 20X2, Parent Company purchased the last 10% of the common stock of;Subsidiary Company for $35,600, a price equal to book value.;Net;income and dividends for two years for Subsidiary Company were:.........................;Net income for year;20X1;20X2;$50,000;$96,000;Dividends, paid-in December.................;0;40,000;In 20X2;the net income of Subsidiary for the first half of the year was $40,000.;In both;20X1 and 20X1, Parent has accounted for its investment in Subsidiary using the;simple equity method.;Required;a.;Using the information above or on the separate;worksheet, prepare determination and distribution of excess schedules for the;first two purchases. Use the parent company concept (prorate market value;approach) in any write-up of assets.;b. Complete;the Figure 7-4 worksheet for consolidated financial statements for 20X2.;7-22;Chapter 7;7-23;Chapter 7;10.;On January 1, 20X1, Parent Company purchased 10% of;the common stock of Subsidiary Company for $60,000. On this date, Subsidiary;had common stock, other paid-in capital, and retained earnings of $20,000;$160,000, and $150,000 respectively. Any excess of cost over book value was;attributed to a patent, to be amortized over 10 years.;On July 1;20X2, Parent Company purchased an additional 80% of the common stock of;Subsidiary Company for $350,000. On this date, any excess of cost over book;value was again attributed to a patent, to be amortized over 10 years.;Net;income and dividends for two years for Subsidiary Company were:........................;Net income for year;20X1;20X2;$50,000;$100,000;Dividends, paid-in December................;0;40,000;In 20X2, the;net income of Subsidiary for the first half of the year was $45,000.;For 20X1;Parent accounted for its investment using the cost method. On July 1, 20X2, an;entry was NOT made to convert the first 10% to the equity method. For the last;half of 20X2, Parent accounted for all of its investment using the simple;equity method.;In the last;quarter of 20X2, Subsidiary sold land with a cost of $20,000 to Parent for;$30,000. On December 31, 20X2, Parent still holds the land.;Required;a.;Using the information above or on the separate;worksheet, prepare determination and distribution of excess schedules for the;two purchases.;b. Complete;the Figure 7-5 worksheet for consolidated financial statements for 20X2.;7-25;Chapter 7;11.;On January 1, 20X1, Parent Company purchased 40% of;the common stock of Subsidiary Company for $120,000. On this date, Subsidiary;had common stock, other paid-in capital, and retained earnings of $20,000;$80,000, and $150,000 respectively. Any excess of cost over book value was;attributed to a patent, to be amortized over 10 years.;On April 1;20X2, Parent Company purchased an additional 50% of the common stock of;Subsidiary Company for $190,000. On this date, any excess of cost over book;value was again attributed to a patent, to be amortized over 10 years.;Net;income and dividends for 2 years for Subsidiary Company were:........................;Net income for year;20X1;20X2;$50,000;$100,000;Dividends, paid-in December................;0;40,000;In 20X2;the net income of Subsidiary for the first quarter of the year was $30,000.;For 20X1, Parent accounted for its investment in Subsidiary;using the sophisticated equity method. For all of 20X2, Parent accounted for;all of its investment using the simple equity method.;In the last;quarter of 20X2, Subsidiary sold land with a cost of $20,000 to Parent for;$30,000. On December 31, 20X2, Parent still holds the land.;Required;a.;Using the information above or on the separate;worksheet, prepare determination and distribution of excess schedules for the;two purchases.;b. Complete;the Figure 7-6 worksheet for consolidated financial statements for 20X2.;7-27;Chapter 7;12.;On January 1, 20X1, Parent Company acquired 80% of;the common stock of Subsidiary Company for $400,000. On this date, Subsidiary;had total owners' equity of $400,000. Any excess of cost over book value was;due to goodwill.;During 20X1 and 20X2, Parent has appropriately accounted for its;investment in Subsidiary using the simple equity method.;During;20X2, Subsidiary had net income of $90,000, of which one-half was earned during;the first six months. Dividends of $30,000 were declared and paid-in December;20X2.;For the;first half of 20X2, Parent recorded its 80% share of Subsidiary's net income.;The balance in the investment on July 1, 20X2 was $476,000.;On July 1;20X2, Parent Company sold 10% of the total stock of Subsidiary, reducing its;investment percentage to 70%. The following entry was made on that date, for;the 10% sold only, to record the sale of the 10% investment.;Cash.......................................;63,125;Gain on Sale of Subsidiary Stock.......;4,000;Investment In Sub. Company.............;59,125;(476,000 x;1/8) - 375;On January;1, 20X2, Subsidiary held merchandise acquired from Parent for $10,000. During;20X2, Parent sold merchandise to Subsidiary for $70,000, of which $15,000 is;held by Subsidiary on December 31, 20X2. Parent's usual gross profit on;affiliated sales is 40%.;Required;Complete;the Figure 7-7 worksheet for consolidated financial statements for the year;ended December 31, 20X2.;7-28;Chapter 7;7-29;Chapter 7;13.;On January 1, 20X1, Pepper Company purchased 90% of;the common stock of Salt Company for $330,000. Any excess of cost over book;value on this date is attributed to a patent, to be amortized over 10 years.;On;this date, Salt had total shareholders' equity as follows;8% Preferred Stock, $100 par...........................;$100,000;Common Stock, $10 par..................................;50,000;Other Paid-in;Capital..................................;120,000;Retained;Earnings......................................;180,000;Total................................................;$450,000;========;The 8% preferred stock is cumulative, non-participating, and has;a liquidating value of par plus dividends in arrears. There were no preferred;dividends in arrears on January 1, 20X1.;During 20X1, Salt had a net loss of $10,000 and paid no;dividends. In 20X2, Salt had net income of $100,000 and paid dividends, on;preferred and common, totaling $36,000.;In 20X1 and;20X2, Pepper has accounted for its investment in Salt using the simple equity;method.;During;20X2, Salt sold merchandise to Pepper for $40,000, of which $20,000 is still;held by Pepper on December 31, 20X2. Salt's usual gross profit is 40%.;Required;Complete;the Figure 7-8 worksheet for consolidated financial statements for the year;ended December 31, 20X2.;14.;On January 1, 20X1, Pepper Company purchased 90% of;the common stock of Salt Company for $330,000. Any excess of cost over book;value on this date is attributed to a patent, to be amortized over 10 years.;On;this date, Salt had total shareholders' equity as follows;8% Preferred Stock, $100 par...........................;$100,000;Common Stock, $10;par..................................;50,000;Other Paid-in;Capital..................................;120,000;Retained;Earnings......................................;180,000;Total................................................;$450,000;========;The 8% preferred stock is cumulative, non-participating, and has;a liquidating value of par plus dividends in arrears. There were no preferred;dividends in arrears on January 1, 20X1.;During 20X1, Salt had a net loss of $10,000 and paid no;dividends. In 20X2, Salt had net income of $100,000 and paid dividends, on;preferred and common, totaling $36,000.;In 20X1 and;20X2, Pepper has accounted for its investment in Salt using the cost method.;During;20X2, Salt sold merchandise to Pepper for $40,000, of which $20,000 is still;held by Pepper on December 31, 20X2. Salt's usual gross profit is 40%.;Required;Complete;the Figure 7-9 worksheet for consolidated financial statements for the year;ended December 31, 20X2.;7-31

 

Paper#44379 | Written in 18-Jul-2015

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