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Problem 8-4 (LO 2) Worksheet, subsidiary stock sale with parent purchase, inter-;company merchandise. On January 1, 2012, Mitta Corporation acquires a 60% interest;(12,000 shares) in Train Company for $156,000. Train stockholders? equity on the purchase;date is as follows;Common stock ($5par)........................... $100,000;Paid-incapital inexcessofpar..................... 50,000;Retained earnings............................... 80,000;Totalstockholders? equity........................ $230,000;At the purchase date, Train?s book values for assets and liabilities closely approximate fair;values. Any excess of cost over book value is attributed to goodwill.;On January 1, 2013, Train Company sells 5,000 shares of common stock in a public offer-;ing at $20 per share. Mitta Corporation purchases 4,000 shares.;During 2013, Mitta sells $30,000 of goods to Train at a gross pro?t of 25%. There are;$6,000 of Mitta goods in Train?s beginning inventory and $8,000 of Mitta goods in Train?s end-;ing inventory.;Merchandise sales by Train to Mitta are $20,000 during 2013 at a gross pro?t of 30%.;There are $6,000 of Train goods in Mitta?s beginning inventory and $2,000 of Train goods in;Mitta?s ending inventory.;Intercompany gross pro?t rates have been constant for many years. There are no intercom-;pany payables/receivables.;Mitta?s investment in Train Company balance is determined as follows;Originalcost............................................................ $156,000;60%ofTrain 2012income ($40,000 60%).......................... 24,000;Subtotal.............................................................. $180,000;Less60%ofTrain dividends declared in2012(60% $8,000)........ (4,800);Subtotal.............................................................. $175,200;Costtoacquireadditionalshares (new issue)................................... 80,000;64%ofTrain 2013income ($50,000 ?64%).................................. 32,000;Subtotal.............................................................. $287,200;Less64%ofTrain dividends declared in2013(64% ?$10,000)................... (6,400);Investmentbalance, December31,2013.................................... $280,800;The trial balances of the two companies as of December 31, 2013, are as follows;Mitta Train;Corporation Company;Cash.................................................... 106,200 63,500;Accounts Receivable........................................ 113,600 60,000;Inventory................................................. 350,000 80,000;InvestmentinTrain Company................................280,800;Property,Plant, andEquipment.............................. 1,800,000 360,000;Accumulated Depreciation.................................. (600,000) (89,500);Accounts Payable.......................................... (180,000) (64,000);Other CurrentLiabilities..................................... (26,000) (8,000);BondsPayable............................................. (500,000);Mitta Train;Corporation Company;Company;CommonStock($10 par).................................... (1,000,000);CommonStock($5par)..................................... (125,000);Paid-In Capital inExcess ofPar..............................(125,000);Retained Earnings,January 1,2013.......................... (212,600) (112,000);Sales.................................................... (1,950,000) (600,000);Subsidiary Income.......................................... (32,000);Costof GoodsSold......................................... 1,170,000 420,000;Other Expenses............................................ 630,000 130,000;Dividends Declared......................................... 50,000 10,000;Totals.................................................. 0 0;Prepare the worksheet necessary to produce the consolidated?nancial statements of Mitta;Corporation and its subsidiary as of December 31, 2013. Include the determination and distri-;bution of excess and income distribution schedule.

 

Paper#74384 | Written in 18-Jul-2015

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