Question

Peanut Company acquired 90 percent of Snoopy Company’s outstanding common stock for $305,100 on January 1, 20X8, when the book value of Snoopy’s net assets was equal to $339,000. 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		$	168,000								$	74,000
Accounts Receivable			172,000									66,000
Inventory			209,000									93,000
Investment in Snoopy Company			350,100
Land			214,000									99,000
Buildings and Equipment			718,000									185,000
Cost of Goods Sold			198,000									109,000
Depreciation Expense			44,000									9,000
Selling & Administrative Expense			224,000									31,000
Dividends Declared			87,000									33,000
Accumulated Depreciation						$	435,000								$	18,000
Accounts Payable							58,000									43,000
Bonds Payable							195,000									67,000
Common Stock							495,000									183,000
Retained Earnings							340,400									156,000
Sales							786,000									232,000
Income from Snoopy Company							74,700									0
Total		$	2,384,100			$	2,384,100				$	699,000			$	699,000

Required:
a. Prepare any equity method entry(ies) related to the investment in Snoopy Company during 20X8. (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 20X8. Assume the company prepares the optional Accumulated Depreciation Consolidation Entry. (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

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				Consolidation Entries
		Peanut	Snoopy	Debit	Credit	Consolidated
Sales		$7,86,000	$2,32,000			$10,18,000
Less: COGS		$1,98,000	$1,09,000			$3,07,000
Less: Depreciation Expense		$44,000	$9,000			$53,000
Less: Selling and Admin Expense		$2,24,000	$31,000			$2,55,000
Income from Snoopy		$74,700	$0	$74,700		$0
Consolidated Net Income		$3,94,700	$83,000	$74,700	$0	$4,03,000
Less: NCI Net Income				$8,300		$8,300
Controlling interest in Net income		$3,94,700	$83,000	$83,000	$           -	$3,94,700
Statement of Retained earning:
Beginning Balance		$3,40,400	$1,56,000	$1,56,000		$3,40,400
Net Income		$3,94,700	$83,000	$83,000	$0	$3,94,700
Less Dividend declared		$87,000	$33,000		$33,000	$87,000
Ending Balance		$6,48,100	$2,06,000	$2,39,000	$33,000	$6,48,100
Assets:
Cash		$1,68,000	$74,000			$2,42,000
Accounts Receivable		$1,72,000	$66,000			$2,38,000
Inventory		$2,09,000	$93,000			$3,02,000
Investment in Snoopy		$3,50,100			$3,50,100	$0
Land		$2,14,000	$99,000			$3,13,000
Building and Equipment		$7,18,000	$1,85,000		$9,000	$8,94,000
Less: Acc Dep		$4,35,000	$18,000	$9,000		$4,44,000
Total Assets		$13,96,100	$4,99,000	$9,000	$3,59,100	$15,45,000
Liabilities and Equity:
Accounts Payable		$58,000	$43,000			$1,01,000
Bonds Payable		$1,95,000	$67,000			$2,62,000
Common Stock		$4,95,000	$1,83,000	$1,83,000		$4,95,000
Retained Earnings		$6,48,100	$2,06,000	$2,39,000	$33,000	$6,48,100
NCI in net asset of Snoopy	Working below			$38,900	$38,900
Total Liabilities and Equity		$13,96,100	$4,99,000	$4,22,000	$71,900	$15,45,000
NCI in net asset of Snoopy:
NCI Amount 10%	305100/90%	$33,900
Net Income	83000*10%	$8,300
Dividend	33000*10%	-$3,300
NCI in Net Assets of Snoopy		$38,900