Week 3 assignment advanced accounting
- 1. P5-39 Comprehensive Problem: Majority-Owned Subsidiary Master Corporation acquired 80 percent ownership of Stanley Wood Products Company on January 1, 20X1, for $160,000. On that date, the fair value of the noncontrolling interest was $40,000, and Stanley reported retained earnings of $50,000 and had $100,000 of common stock outstanding. Master has used the equity method in accounting for its investment in Stanley. Trial balance data for the two companies on December 31, 20X5, are as follows: Page 241 Additional Information 1. On the date of combination, the fair value of Stanley’s depreciable assets was $50,000 more than book value. The accumulated depreciation on these assets was $10,000 on the acquisition date. The differential assigned to depreciable assets should be written off over the following 10-year period. 2. There was $10,000 of intercorporate receivables and payables at the end of 20X5. Required a. Give all journal entries that Master recorded during 20X5 related to its investment in Stanley.
- 2. Cash 8,000 Investment in Stanley Wood 8,000 (To Record Dividends from Stanley Wood) Investment in Stanley Wood 24,000 Income From Stanley Wood 24,000 (To Record Income Under Equity Method) Income From Stanley Wood 4,000 Investment in Stanley Wood 4,000 b. Give all consolidation entries needed to prepare consolidated statements for 20X5. Income from Subsidiary 20,000 Dividends Declared 8,000 Investment in SW Products Stock 12,000 (Eliminate Income from Subsidiary) Income to Non-Controlling Interest 5,000 Dividends Declared 2,000 Non-Controling Interest 3,000
- 3. Common Stock - SW Products 100,000 Retained Earnings 90,000 Differential 30,000 Investment in SW Products Stock 176,000 Non-Controling Interest 44,000 Building and Equipment 50,000 Accumulated Depreciation 20,000 Differential 30,000 (Assign Beginning Differential) Depreciation Expense 5,000 Accumulated Depreciation 5,000 (Amortise Differential) Accounts Payable 10,000 Cash and Receivables 10,000 (Eliminate Inter-Corporate Recivables and Payables) c. Prepare a three-part worksheet as of December 31, 20X5.
- 4. Master Stanley Wood Elimination Entries Corporation Company Debit Credit Consolidated Income Statement Sales 200,000 100,000 300,000 Cost of Goods Sold (120,000) (50,000) (170,000) Depreciation Expense (25,000) (15,000) 5,000 (45,000) Inventory Losses (15,000) (5,000) (20,000) Income from Stanley Wood 20,000 24,000 4,000 - Non-Controlling Interest in Net Income 6,000 1,000 (5,000) Controlling Interest in Net Income 60,000 30,000 35,000 5,000 60,000 Statement of Retained Earnings Beginning Balance 314,000 90,000 90,000 314,000 Net Income 60,000 30,000 35,000 5,000 60,000 Dividend Declared (30,000) (10,000) 10,000 (30,000) Ending Balance 344,000 110,000 125,000 15,000 344,000 Balance Sheet
- 5. Cash and Receivables 81,000 65,000 10,000 136,000 Inventory 260,000 90,000 350,000 Land 80,000 80,000 160,000 Buildings and Equipment 500,000 150,000 50,000 700,000 Accumulated Depreciation (205,000) (105,000) 25,000 (335,000) Investment in Stanley Wood 188,000 168,000 20,000 Total Assets 904,000 280,000 50,000 223,000 1,011,000 Accounts Payable 60,000 20,000 10,000 70,000 Notes Payable 200,000 50,000 250,000 Common Stock 300,000 100,000 100,000 300,000 Retained Earnings 344,000 110,000 125,000 15,000 344,000 Non-Controlling Interest 42,000 47,000 5,000 Total Liabilities & Equity 904,000 280,000 235,000 62,000 1,011,000