Question

Peanut Company acquired 100 percent of Snoopy Company’s outstanding common stock for $303,000 on January 1, 20X8, when the book value of Snoopy’s net assets was equal to $303,000. Accumulated depreciation on this date was $20,000. Peanut chooses to carry the investment in Snoopy at cost because the investment will be consolidated. The following trial balance summarizes the financial position and operations for Peanut and Snoopy as of December 31, 20X9:

	Peanut Company							Snoopy Company
	Debit			Credit				Debit			Credit
Cash	$	234,000						$	84,000
Accounts Receivable		197,000							81,000
Inventory		188,000							117,000
Investment in Snoopy Company		303,000							0
Land		210,000							109,000
Buildings & Equipment		705,000							208,000
Cost of Goods Sold		282,000							145,000
Depreciation Expense		59,000							20,000
Selling & Administrative Expense		239,000							66,000
Dividends Declared		243,000							40,000
Accumulated Depreciation				$	513,000						$	60,000
Accounts Payable					56,000							21,000
Bonds Payable					134,000							68,000
Common Stock					483,000							185,000
Retained Earnings					587,000							249,000
Sales					847,000							287,000
Dividend Income					40,000							0
Total	$	2,660,000		$	2,660,000			$	870,000		$	870,000

  
Required:
a. Prepare any journal entry(ies) related to the investment in Snoopy Company during 20X9. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

b. Prepare a consolidation worksheet for 20X9. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)

Answer 1

Part A

Event	General journal	Debit	Credit
1	Cash	40000
	Dividend income		40000
	(To record Peanut Co.'s 100% share of Snoopy Co.'s 20X9 dividend)

Part B

PEANUT COMPANY AND SUBSIDIARY
Consolidate financial statements worksheet
December 31, 20X9
			Consolidation entries
	Peanut co.	Snoopy co.	DR	CR	Consolidated
Income statement
Sales	847000	287000			1134000
Less: cost of gold sold	(282000)	(145000)			-427000
Less: depreciation expense	(59000)	(20000)			-79000
Less: selling & administrative expense	(239000)	(66000)			-305000
Dividend income	40000	0	40000		0
Net income	307000	56000	40000	0	323000
Statement of retained earnings
Beginning balance	587000	249000	118000		718000
Net income	307000	56000	40000		323000
Less: dividend declared	(243000)	(40000)		40000	(243000)
Ending balance	651000	265000	158000	40000	798000
Balance sheet
Assets
Cash	234000	84000			318000
Accounts receivables	197000	81000			278000
Inventory	188000	117000			305000
Investment in snoopy co.	303000			303000	0
Land	210000	109000			319000
Buildings & Equipment	705000	208000		20000	893000
Less: accumulated depreciation	-513000	-60000	20000		-553000
Total assets	1324000	539000	20000	323000	1560000
Liabilities & Equity
Accounts payable	56000	21000			77000
Bonds payable	134000	68000			202000
Common stock	483000	185000	185000		483000
Retained earnings	651000	265000	158000	40000	798000
Total liabilities and Equity	1324000	539000	343000	40000	1560000

303000-185000 = 118000