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Question;7.;On January 1, 20X1, Prism Company purchased 7,500;shares of the common stock of Sight Company for $495,000. On this date, Sight;had 20,000 shares of $10 par common stock authorized, 10,000 shares issued and;outstanding. Other paid-in capital and retained earnings were $200,000 and;$300,000 respectively. On January 1, 20X1, any excess of cost over book value;is due to a patent, to be amortized over 15 years.;Sight's;net income and dividends for two years were:.................................;Net income;20X1;20X2;$50,000;$80,000;Dividends..................................;10,000;20,000;In;November, 20X1, Sight Company also declared a 10% stock dividend at a time when;the market price of its common stock was $50 per share. The stock dividend was;distributed on December 31, 20X1.;For both;20X1 and 20X2, Prism Company has accounted for its investment in Sight using;the cost method.;During 20X1, Sight Company sold goods to Prism Company for;$40,000, of which $10,000 was on hand on December 31, 20X1. During 20X2, Sight;sold goods to Prism for $60,000 of which $15,000 was on hand on December 31;20X2. Sight's gross profit on intercompany sales is 40%.;Required;Complete the Figure 8-4 worksheet for consolidated financial;statements for 20X2.;8-17;8-18;Chapter 8;8.;On January 1, 20X1, Parent Company purchased 8,000;shares of the common stock of Subsidiary Company for $350,000. On this date;Subsidiary had 20,000 shares of $5 par common stock authorized, 10,000 shares;issued and outstanding. Other paid-in capital and retained earnings were;$150,000 and $200,000 respectively. On January 1, 20X1, any excess of cost over;book value is due to a patent, to be amortized over 15 years. Subsidiary's net;income and dividends for two years were:.................................;Net income;20X1;20X2;$50,000;$90,000;Dividends..................................;10,000;30,000;On January;1, 20X2, Subsidiary Company sold an additional 2,000 shares of common stock to;one individual for $50 per share. The shares were not issued in a public;offering.;On this;date, Parent Company recorded the following entry on its books as a result of;its change in percentage ownership of Subsidiary Company.;Jan. 1 Investment in Subsidiary Company...;8,000;Other Paid-in Capital............;8,000;To record increase in ownership;interest;For both;20X1 and 20X2, Parent Company has correctly applied the simple equity method.;In the last;quarter of 20X2, Subsidiary Company sold goods to Parent Company for $40,000. Subsidiary's;usual gross profit on intercompany sales is 40%. On December 31, $7,500 of;these goods are still in Parent's ending inventory.;Required;Complete;the Figure 8-5 worksheet for consolidated financial statements for 20X2.;8-19;Chapter;8;8-20;Chapter 8;9.;On January 1, 20X1, Parent Company purchased 8,000;shares of the common stock of Subsidiary Company for $350,000. On this date;Subsidiary had 20,000 shares of $5 par common stock authorized, 10,000 shares;issued and outstanding. Other paid-in capital and retained earnings were;$150,000 and $200,000 respectively. On January 1, 20X1, any excess of cost over;book value is due to a patent, to be amortized over 15 years. Subsidiary's net income;and dividends for 2 years were:.................................;Net income;20X1;20X2;$50,000;$90,000;Dividends..................................;10,000;30,000;On January;1, 20X2, Subsidiary Company sold an additional 2,000 shares of common stock to;one individual for $50 per share. The shares were not issued in a public;offering.;For both;20X1 and 20X2, Parent Company has correctly applied the cost method.;In the last;quarter of 20X2, Subsidiary Company sold goods to Parent Company for $40,000.;Subsidiary's usual gross profit on intercompany sales is 40%. On December 31;$7,500 of these goods are still in Parent's ending inventory.;Required;Complete;the Figure 8-6 worksheet for consolidated financial statements for 20X2.;8-22;Chapter 8;10.;On January 1, 20X1, Parent Company purchased 9,000;shares of the common stock of Subsidiary Company for $405,000. On this date;Subsidiary had 20,000 shares of $5 par common stock authorized, 10,000 shares;issued and outstanding. Other paid-in capital and retained earnings were;$150,000 and $200,000 respectively. On January 1, 20X1, any excess of cost over;book value is due to a patent, to be amortized over 15 years. Subsidiary's net;income and dividends for two years were:.................................;Net income;20X1;20X2;$50,000;$80,000;Dividends..................................;10,000;20,000;On January;1, 20X2, Subsidiary Company sold an additional 2,000 shares of common stock for;$50 per share. The shares were not issued in a public offering. Parent;purchased 1,200 shares of the new issue, and one individual purchased the other;800.;On this;date, Parent Company recorded the following entries on its books for the;purchase and as a result of its change in percentage ownership of Subsidiary;Company.;Jan. 1;Investment in;Subsidiary Company.......;60,000;Other Paid-in Capital................;60,000;To record purchase of 1,200 shares;Jan. 1;Investment in;Subsidiary Company.......;3,000;Other Paid-in Capital................;3,000;To record increase in;ownership;interest;For both;20X1 and 20X2, Parent Company has correctly applied the simple equity method.;In the last;quarter of 20X2, Subsidiary Company sold goods to Parent Company for $40,000.;Subsidiary's usual gross profit on intercompany sales is 40%. On December 31;$10,000 of these goods are still in Parent's ending inventory.;Required;Complete;the Figure 8-7 worksheet for consolidated financial statements for 20X2.;8-23;Chapter;8;8-24;Chapter 8;11.;On January 1, 20X1, Parent Company purchased 80% of;the common stock of Sub-One Company for $87,000. On this date, Sub-One had;common stock, other paid-in capital, and retained earnings of $10,000, $20,000;and $60,000 respectively.;On January;1, 20X2, Parent Company purchased 90% of the common stock of Sub-Two Company;for $73,500. On this date, Sub-Two had common stock, other paid-in capital, and;retained earnings of $5,000, $30,000, and $40,000 respectively.;Any excess of cost over book value on either purchase is due to;the patent, to be amortized over 15 years.;For both 20X1 and 20X2, Parent has accounted for both;subsidiaries using the simple equity method.;On July 1;20X2, Sub-One sold used equipment to Sub-Two. The equipment had a cost of $50,000;and accumulated depreciation of $20,000. The sale price was $36,000. During the;last half of 20X2, Sub-Two used the equipment, depreciating it over five years;using the straight-line method.;During 20X2, Sub-Two sold merchandise to Sub-One for $10,000, of;which $5,000 is still held by Sub-One on December 31, 20X2. Sub-Two's gross;profit was 40%.;Required;Complete the Figure 8-8 worksheet for consolidated financial;statements for 20X2.;8-25;Chapter;8;8-26;Chapter 8;12.;On January 1, 20X1, Parent Company purchased 90% of;the common stock of Sub-A Company for $90,000. On this date, Sub-A had common;stock, other paid-in capital, and retained earnings of $10,000, $20,000, and;$60,000 respectively.;On January;1, 20X2, Sub-A Company purchased 80% of the common stock of Sub-B Company for;$68,000. On this date, Sub-B Company had common stock, other paid-in capital;and retained earnings of $5,000, $30,000, and $40,000 respectively.;Any excess of cost over book value on either purchase is due to;a patent, to be amortized over ten years.;Both Parent and Sub-A have accounted for their investments using;the simple equity method.;During 20X2, Sub-B sold merchandise to Sub-A for $20,000, of;which one-fourth is still held by Sub-B on December 31, 20X2. Sub-B's usual;gross profit is 40%. During 20X3, Sub-B sold more goods to Sub-A for $30,000;of which $10,000 is still on hand on December 31, 20X3.;Required;Complete the Figure 8-9 worksheet for consolidated financial;statements for 20X3.;8-27;DIF: D OBJ: 4

 

Paper#44384 | Written in 18-Jul-2015

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