Question

Prince corporation holds 75% of the common stock of sword distributors Inc. purchased on Dec 31, 20x1 for $ 2,220,000 at the date of acquisition, sword reported common stock with a par value of $950000 additional paid in capital of $1300000 and retained earnings of $550000. the fair value of the non controlling interest at acquisition was $740000. the differential at acquisition was attributable to the following items:

Inventory sold in 20x2 40000

Land 56000

Good will 64000

Total Differential 160000

during 20x2 prince sold  a plot of land that it had purchased several years before to sword at again of $22400 sword continues to hold the land in 20x6 prince and sword entered into a five year contract under which prince provides management consulting services to sword on a per year for these services at Dec 31, 20x8 sword

Prince Corporation holds 75 percent of the common stock of Sword Distributors Inc., purchased on December 31, 20X1, for $2,220,000. At the date of acquisition, Sword reported common stock with a par value of $950,000, additional paid-in capital of $1,300,000, and retained earnings of $550,000. The fair value of the non controlling interest at acquisition was $750,000. The differential at acquisition was attributable to the following items:

Inventory (sold in 20X2) $ 40,000

Land 56,000

Goodwill 64,000

Total Differential $ 160,000

During 20X2, Prince sold a plot of land that it had purchased several years before to Sword at a gain of $22,400; Sword continues to hold the land. In 20X6, Prince and Sword entered into a five-year contract under which Prince provides management consulting services to Sword on a continuing basis; Sword pays Prince a fixed fee of $85,000 per year for these services. At December 31, 20X8, Sword owed Prince $21,250 as the final 20X8 quarterly payment under the contract.

On January 2, 20X8, Prince paid $240,000 to Sword to purchase equipment that Sword was then carrying at $280,000. Sword had purchased that equipment on December 27, 20X2, for $420,000. The equipment is expected to have a total 15-year life and no salvage value. The amount of the differential assigned to goodwill has not been impaired.

At December 31, 20X8, trial balances for Prince and Sword appeared as follows:

	Prince Corporation									Sword Distributors Inc.
Item	Debit				Credit					Debit				Credit
Cash		$	64,700								$	52,000
Current Receivables			105,800									93,400
Inventory			288,000									220,900
Investment in Sword Distributors			2,910,100
Land			408,000									1,207,000
Buildings & Equipment			2,440,000									3,040,000
Cost of Goods Sold			2,191,000									513,000
Depreciation & Amortization			195,000									71,000
Other Expenses			1,366,000									217,000
Dividends Declared			42,000									12,000
Accumulated Depreciation						$	1,090,000								$	417,000
Current Payables							89,200									255,300
Bonds Payable							902,000									187,000
Common Stock							94,000									950,000
Additional Paid-in Capital							1,270,000									1,300,000
Retained Earnings, January 1							1,466,800									1,350,000
Sales							4,850,000									992,000
Other Income or Loss							97,000					25,000
Income from Sword Distributors							151,500
Total		$	10,010,600			$	10,010,600				$	5,451,300			$	5,451,300

As of December 31, 20X8, Sword had declared but not yet paid its fourth-quarter dividend of $5,000. Both companies use straight-line depreciation and amortization. Prince uses the fully adjusted equity method to account for its investment in Sword.

Required:

a. Compute the amount of the differential as of January 1, 20X8.

  

b. Verify the balance in Prince’s Investment in Sword Distributors account as of December 31, 20X8.

  

c. Present all consolidation entries that would appear in a three-part consolidation worksheet as of December 31, 20X8. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to nearest whole dollar amoun

Answer 1

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Answer 2

How about including the consolidated financial statement worksheet?