Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
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Chapter 4, Problem 4.21E
a.
To determine
Introduction: Equity method in accounting is the process of creating investments in associate companies. Equity accounting is usually applied where an investor entity holds 20-50% of the voting stock of the associate company. The investor records such investment as an asset on its
To prepare: Consolidation entries on December 31, 20X4 to prepare consolidation financial statement.
b.
To determine
Introduction: Consolidation Worksheet is a tool which is used in preparation of consolidated financial statement of parent company and its subsidiary.
To prepare: Consolidated worksheet.
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Consolidation at the end of the first year subsequent to date of acquisition-Cost method (purchase price equals book value)
Assume the parent company acquires its subsidiary on January 1, 2019, by exchanging 20,000 shares of its $1 par value Common Stock, with a market value on the acquisition date of $50 per share, for all of the outstanding voting shares of the acquiree. You have been charged with preparing the consolidation of these two companies at the end of the
first year.
On the acquisition date, all of the subsidiary's assets and liabilities had fair values equaling their book values. The parent uses the cost method of pre-consolidation Equity investment bookkeeping. Following are financial statements of the parent and its subsidiary for the year ended December 31, 2019.
Parent Subsidiary
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Investment income
Operating expenses
Net income
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BOY retained earnings
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Consolidation adjustment necessary when affiliate's debt is acquired from non-affiliate Assume that a
Parent company owns 65 percent of its Subsidiary. The parent company uses the equity method to
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necessary for the beginning-of-year Equity investment balance? $Answer Answer Credit
On January 1, 20X3, Plimsol Company acquired 100 percent of Shipping Corporation's voting shares, at underlying book value. Plimsol uses the cost method in accounting for its investment in Shipping. Shipping's
reported retained earnings of $75,000 on the date of acquisition. The trial balances for Plimsol Company and Shipping Corporation as of December 31, 20X4, follow:
24
Item
Current Assets
Depreciable Assets (net)
Investment in Shipping Corporation
Other Expenses
Depreciation Expense
Dividends Declared
Current Liabilities
Long-Term Debt
Common Stock
Retained Earnings
Sales
Dividend Income
Plimsol Company
Debit
Credit
$ 160,000
180,000
125,000
85,000
20,000
30,000
Shipping Corporation
Debit
Credit
$ 115,000
135,000
60,000
15,000
15,000
$ 25,000
75,000
100,000
210,000
175,000
15,000
$ 600,000 $ 600,000 $ 340,000 $ 340,000
$ 20,000
50,000
50,000
Required:
1. Provide all consolidating entries required to prepare a full set of consolidated statements for 20X4.
2. Prepare a three-part…
Chapter 4 Solutions
Advanced Financial Accounting
Ch. 4 - When is the carrying value of the investment...Ch. 4 - What is a differential? How is a differential...Ch. 4 - Prob. 4.3QCh. 4 - Prob. 4.4QCh. 4 - Prob. 4.5QCh. 4 - Prob. 4.6QCh. 4 - Prob. 4.7QCh. 4 - Prob. 4.8QCh. 4 - Prob. 4.9QCh. 4 - Prob. 4.10Q
Ch. 4 - Prob. 4.11QCh. 4 - What determines whether the balance assigned to...Ch. 4 - What does the termpushdown accountingmean?Ch. 4 - Under what conditions is push-down accounting...Ch. 4 - Prob. 4.15QCh. 4 - Prob. 4.2CCh. 4 - Prob. 4.3CCh. 4 - Prob. 4.4CCh. 4 - Prob. 4.1ECh. 4 - Prob. 4.2ECh. 4 - Prob. 4.3ECh. 4 - Prob. 4.4ECh. 4 - Prob. 4.5ECh. 4 - Prob. 4.6ECh. 4 - Prob. 4.7ECh. 4 - Prob. 4.8ECh. 4 - Prob. 4.9ECh. 4 - Prob. 4.10.1ECh. 4 - Prob. 4.10.2ECh. 4 - Prob. 4.10.3ECh. 4 - Prob. 4.10.4ECh. 4 - Prob. 4.10.5ECh. 4 - Prob. 4.11.1ECh. 4 - Prob. 4.11.2ECh. 4 - Prob. 4.11.3ECh. 4 - Prob. 4.11.4ECh. 4 - Prob. 4.12ECh. 4 - Prob. 4.13ECh. 4 - Prob. 4.14ECh. 4 - Prob. 4.15ECh. 4 - Prob. 4.16ECh. 4 - Prob. 4.17ECh. 4 - Prob. 4.18.1ECh. 4 - Prob. 4.18.2ECh. 4 - Prob. 4.18.3ECh. 4 - Prob. 4.18.4ECh. 4 - Prob. 4.18.5ECh. 4 - Prob. 4.18.6ECh. 4 - Prob. 4.19ECh. 4 - Prob. 4.20ECh. 4 - Prob. 4.21ECh. 4 - Prob. 4.22ECh. 4 - Prob. 4.23ECh. 4 - Prob. 4.24AECh. 4 - Prob. 4.25PCh. 4 - Prob. 4.26PCh. 4 - Prob. 4.27PCh. 4 - Consolidated Balance Sheet Powder Company spent...Ch. 4 - Prob. 4.29PCh. 4 - Prob. 4.30PCh. 4 - Prob. 4.31PCh. 4 - Prob. 4.32PCh. 4 - Prob. 4.33PCh. 4 - Prob. 4.34PCh. 4 - Prob. 4.35PCh. 4 - Prob. 4.36PCh. 4 - Prob. 4.37AP
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