Question

Prince Corporation acquired 100 percent of Sword Company on January 1, 20X7, for $19 1,000. The trial balances for the two companies on December 31, 20X7, included the following amounts: Sword Company Debit Credit $ 26,000 71,000 103,000 21,000 152,000 Item Cash Accounts Receivable Inventory Land Buildings and Equipment Investment in Sword Company Cost of Goods Sold Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Mortgages Payable Common Stock Retained Earnings Sales Income from Sword Company Prince Corporation Debit Credit $ 84,000 66,000 180,000 82,000 497,000 242,000 497,000 22,000 68,000 57,000 $ 143,000 67,000 196,000 286,000 334,000 696,000 73,000 $ 1,795,000 $1,795,000 260,000 12,000 68,000 22,000 $ 60,000 28,000 95,000 43,000 93,000 416,000 $735,000 $735,000 Additional Information 1. On January 1, 20X7, Sword reported net assets with a book value of $136,000. A total of $22,000 of the acquisition price is applied to goodwill, which was not impaired in 20X7. 2. Sword's depreciable assets had an estimated economic life of 11 years on the date of combination. The difference between fair value and book value of tangible assets is related entirely to buildings and equipment. 3. Prince used the equity-method in accounting for its investment in Sword. 4. Detailed analysis of receivables and payables showed that Sword owed Prince $23,000 on December 31, 20x7.
How to computer the Accumulated depreciation?

Answer 1

Answer:

5	Accumulated depreciation	49,000
	Buildings and equipment		49,000

Calculation :

Acquisition Price	191000
Add:Net income	76000
less:dividends	-22,000
less:amort	-3000
balance	242000
basic consolidation entry	-190,000
Excess reclassification	52,000

Book Value : 1,36,000

Add Goodwill : 22,000

Total    :1,58,000

Deduct Acquisition Price :1,91,000 = 33,000/estimated economic life

= 33,000/11

Depreciation Expense = 3,000

Excess reclassification (Investment in Sword company)= 52,000(calculated above)

Depreciation Expense = 3,000

Accumulated depreciation = 52,000 - 3,000

= 49,000