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Question;15.;On January 1, 20X1, Parent Company purchased 80% of;the common stock of Subsidiary Company for $300,000. Any excess of cost over;book value on this date is attributed to a patent, to be amortized over 10;years.;On;this date, Subsidiary 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, Subsidiary had a net loss of $10,000 and paid no dividends. In 20X2;Subsidiary had net income of $100,000 and paid dividends, on preferred and;common, totaling $40,000.;On January;1, 20X2, Parent purchased $50,000 par value of Subsidiary's preferred stock for;$52,000. At year end, the preferred is still held as an investment.;In 20X1 and;20X2, Parent has accounted for its investments in Subsidiary's preferred and;common using the simple equity method.;During 20X2, Subsidiary sold merchandise to Parent for $40,000;of which $15,000 is still held by Parent on December 31, 20X2. Subsidiary's;usual gross profit is 40%.;Required;Complete the Figure 7-10 worksheet for consolidated financial;statements for the year ended December 31, 20X2.;7-33;Chapter;7;7-34;Chapter 7;16.;On January 1, 20X1, Parent Company purchased 80% of;the common stock of Subsidiary Company for $380,000. Any excess of cost over;book value on this date is due to goodwill.;On;this date, Subsidiary had common shareholders' equity as follows;Common stock, $10;par..................................;$;50,000;Other;paid-in capital..................................;170,000;Retained;earnings......................................;180,000;Also on the;date of purchase, Subsidiary had outstanding $200,000 par value of 10%;preferred stock that is cumulative and nonparticipating. The preferred stock;has a liquidating value of par, plus dividends in arrears. There were no;preferred dividends in arrears on January 1, 20X1.;During;20X1, Subsidiary had a net income of $30,000 and paid no dividends. In 20X2;Subsidiary had net income of $120,000 and paid dividends, on preferred and common;totaling $60,000.;In 20X1 and 20X2, Parent has accounted for its investment in;Subsidiary using the cost method.;On July 1, 20X2, Parent purchased equipment for $70,000 and;immediately sold it to Subsidiary for $100,000. Subsidiary will use and depreciate;the equipment over 5 years, assuming straight-line depreciation with no salvage;value.;Required;Complete;the Figure 7-11 worksheet for consolidated financial statements for the year;ended December 31, 20X2.;7-35;Chapter;7;Chapter 7;17.;On January 1, 20X1, Parent Company purchased 80% of;the common stock of Subsidiary Company for $380,000. Any excess of cost over;book value on this date is due to goodwill.;On;this date, Subsidiary had common shareholders' equity as follows;Common stock, $10;par..................................;$;50,000;Other;paid-in capital..................................;170,000;Retained;earnings......................................;180,000;Also on the;date of purchase, Subsidiary had outstanding $200,000 par value of 10%;preferred stock that is cumulative and nonparticipating. The preferred stock;has a liquidating value of par, plus dividends in arrears. There were no;preferred dividends in arrears on January 1, 20X1.;During;20X1, Subsidiary had a net income of $30,000 and paid no dividends. In 20X2;Subsidiary had net income of $120,000 and paid dividends, on preferred and;common, totaling $60,000.;On January;1, 20X2, Parent purchased all of Subsidiary's preferred stock for $210,000. At;year-end, the preferred is still held as an investment.;In 20X1 and 20X2, Parent has accounted for its investment in;Subsidiary using the cost method.;On July 1, 20X2, Parent purchased equipment for $70,000 and;immediately sold it to Subsidiary for $100,000. Subsidiary will use and;depreciate the equipment over 5 years, assuming straight-line depreciation with;no salvage value.;Required;Complete;the Figure 7-12 worksheet for consolidated financial statements for the year;ended December 31, 20X2.;7-37;Chapter;7;Chapter 7;18.;On January 1, 20X1, Parent Company acquired 90% of;the common stock of Subsidiary Company for $343,000. On this date, Subsidiary;had total owners' equity of $270,000, including retained earnings of $100,000.;On January;1, 20X1, any excess of cost over book value is attributable to the;undervaluation of land, building, and goodwill. Land is worth $20,000 more than;cost. Building is worth $60,000 more than book value. It has a remaining useful;life of 9 years and is depreciated using the straight-line method.;During 20X1, Parent has appropriately accounted for its;investment in Subsidiary using the cost method.;During 20X1, Subsidiary sold merchandise to Parent for $70,000;of which $20,000 is held by Parent on December 31, 20X1. Subsidiary's usual;gross profit on affiliated sales is 50%.;On December 31, 20X1, Parent still owes Subsidiary $5,000 for;merchandise acquired in December.;On July 1;20X1, Parent sold to Subsidiary some equipment with a cost of $40,000 and a;book value of $18,000. The sales price was $30,000. Subsidiary is depreciating;the equipment over a 4-year life, assuming no salvage value and using the;straight-line method.;Required;Prepare a;determination and distribution of excess schedule. Next, complete the Figure;7-13 worksheet for a consolidated balance sheet as of December 31, 20X1.;7-39;Chapter;7;7-40;Chapter 7;19.;On January 1, 20X1, Parent Company acquired 90% of;the common stock of Subsidiary Company for $337,000. On this date, Subsidiary had;total owners' equity of $270,000, including retained earnings of $100,000.;On January 1, 20X1, any excess of cost over book value is due to;the undervaluation of land, building, and goodwill. Land is worth $10,000 more;than cost. Building is worth $50,000 more than book value, has a remaining life;of 9 years, and is depreciated using the straight-line method.;During 20X1 and 20X2, Parent has appropriately accounted for its;investment in Subsidiary using the simple equity method.;During;20X2, Subsidiary sold merchandise to Parent for $50,000, of which $10,000 is;held by Parent on December 31, 20X1. Subsidiary's gross profit on sales is 40%.;On December 31, 20X1, Parent still owes Subsidiary $7,000 for merchandise;acquired in December.;On July 1;20X0, Subsidiary sold $100,000 par value of 10%, 10-year bonds for $104,000.;The bonds pay interest semiannually on January 1 and July 1. Straight-line;amortization of premium is used. On January 1, 20X2, Parent repurchased;one-half of the bonds at par.;On January;1, 20X2, Parent purchased equipment for $104,610 and immediately leased the;equipment to Subsidiary on a 4-year lease. The minimum lease payments of;$30,000 are to be made annually on January 1, beginning immediately, for a;total of 4 payments. The implicit interest rate is 10%. The useful life of the;equipment is 4 years. The lease has been capitalized by both companies.;Subsidiary is depreciating the equipment using the straight-line method and;assuming a salvage value of $4,610.;A partial;lease amortization schedule, applicable to either company, is presented below;Carrying;Carrying;Interest;Interest;Payment;Principal;Value on;Value;Rate;Reduction;1-1-20X2;$104,610;1-1-20X2;-;30,000;10%;$7,461;$30,000;$22,539;$;74,610;1-1-20X3;-;22,539;$ 52,071;Required;Prepare a;determination and distribution of excess schedule. Next, complete the Figure;7-14 worksheet for a consolidated balance sheet as of December 31, 20X2. Round;all computations to the nearest dollar.;7-41;Chapter;7

 

Paper#44380 | Written in 18-Jul-2015

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