Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
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Question
Chapter 3, Problem 3.28P
a.
To determine
Concept introduction The consolidation process is the process of adding all the financial values of all the associate companies into one final financial report as of the parent company.
To prepare: The equity method entry related to the investment.
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Instructions
At a total cost of $6,950,000, Herrera Corporation acquired 229,500 shares of Tran Corp. common stock
as a long-term investment. Herrera Corporation uses the equity method of accounting for this investment.
Tran Corp. has 850,000 shares of common stock outstanding, including the shares acquired by Herrera
Corporation.
Required:
A. Journalize the entries by Herrera Corporation on December 31 to record the following
information (refer to the Chart of Accounts for exact wording of account titles):
1. Tran Corp. reports net income of $974,000 for the current period.
2. A cash dividend of $0.28 per common share is paid by Tran Corp. during the current
period.
B. Why is the equity method appropriate for the Tran Corp. investment?
On January 1, Vienna Corporation purchased 40% of the outstanding common stock of the Marietta Corporation for $137,500. During the year, Marietta Corporation reported net income of $50,000 and paid cash dividends of $25,000.The balance of the Investment in the Marietta Corporation account on the books of Vienna Corporation at year-end is:
Select one:
A. $147,500
B. $135,000
C. $100,000
D. $110,000
Peanut Company acquired 90 percent of Snoopy Company’s outstanding common stock for $270,000 on January 1, 20X8, when the book value of Snoopy’s net assets was equal to $300,000. Peanut uses the equity method to account for investments. Trial balance data for Peanut and Snoopy as of December 31, 20X8, follow:
Peanut Company
Snoopy Company
Debit
Credit
Debit
Credit
Cash
$ 158,000
$ 80,000
Accounts Receivable
165,000
65,000
Inventory
200,000
75,000
Investment in Snoopy Company
319,500
0
Land
200,000
100,000
Buildings and Equipment
700,000
200,000
Cost of Goods Sold
200,000
125,000
Depreciation Expense
50,000
10,000
Selling & Administrative Expense
225,000
40,000
Dividends Declared
100,000
20,000
Accumulated Depreciation
$ 450,000
$ 20,000
Accounts Payable
75,000
60,000
Bonds Payable
200,000
85,000
Common Stock
500,000
200,000
Retained Earnings
225,000
100,000
Sales
800,000
250,000…
Chapter 3 Solutions
Advanced Financial Accounting
Ch. 3 - What is the basic idea underlying the preparation...Ch. 3 - How might consolidated statements help an investor...Ch. 3 - Prob. 3.3QCh. 3 - Prob. 3.4QCh. 3 - Prob. 3.5QCh. 3 - Prob. 3.6QCh. 3 - Prob. 3.7QCh. 3 - Prob. 3.8QCh. 3 - Prob. 3.9QCh. 3 - Prob. 3.10Q
Ch. 3 - Prob. 3.11QCh. 3 - Prob. 3.12QCh. 3 - What is meant by indirect control? Give an...Ch. 3 - Prob. 3.14QCh. 3 - Prob. 3.15QCh. 3 - Prob. 3.16QCh. 3 - Prob. 3.17QCh. 3 - Prob. 3.18QCh. 3 - Prob. 3.1CCh. 3 - Prob. 3.2CCh. 3 - Prob. 3.1.1ECh. 3 - Prob. 3.1.2ECh. 3 - Prob. 3.1.3ECh. 3 - Prob. 3.1.4ECh. 3 - Multiple-Choice Question on Variable Interest...Ch. 3 - Multiple-Choice Question on Variable Interest...Ch. 3 - Prob. 3.2.3ECh. 3 - Prob. 3.2.4ECh. 3 - Prob. 3.3.1ECh. 3 - Prob. 3.3.2ECh. 3 - Prob. 3.3.3ECh. 3 - Prob. 3.4.1ECh. 3 - Prob. 3.4.2ECh. 3 - Prob. 3.4.3ECh. 3 - Prob. 3.4.4ECh. 3 - Balance Sheet Consolidation On January 1, 20X3,...Ch. 3 - Prob. 3.6ECh. 3 - Prob. 3.7ECh. 3 - Prob. 3.8ECh. 3 - Prob. 3.9ECh. 3 - Reporting for a Variable Interest Entity Gamble...Ch. 3 - Prob. 3.11ECh. 3 - Prob. 3.12ECh. 3 - Prob. 3.13ECh. 3 - Prob. 3.14ECh. 3 - Prob. 3.15ECh. 3 - Prob. 3.16ECh. 3 - Prob. 3.17ECh. 3 - Prob. 3.18ECh. 3 - Prob. 3.19.1PCh. 3 - Prob. 3.19.2PCh. 3 - Prob. 3.20PCh. 3 - Prob. 3.21PCh. 3 - Prob. 3.22PCh. 3 - Prob. 3.23PCh. 3 - Prob. 3.24PCh. 3 - Prob. 3.25PCh. 3 - Prob. 3.26PCh. 3 - Prob. 3.27PCh. 3 - Prob. 3.28PCh. 3 - Prob. 3.29PCh. 3 - Consolidated Worksheet at End of the First Year of...Ch. 3 - Prob. 3.31P
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