Need help in preparing normal or required equity-method entries related to the investment in Rebecca Company during 20XX.
And need help in preparing a consolidation worksheet
Homework Answers
Acquisition Method of Accounting with Adjusted entries ( Shown as Debit / credit)
| Debit ($) | Credit ($) | Source | |
| Investment in Rebecca | 75,000 | ( as per Question - Income from Rebecaa) | |
| Bank | 75,000 | ||
| Bank | 20,000 | ||
| Investment in Rebecca | 20,000 | ||
| ( Dividend declared) |
| Common Stock($) | Retained Earnings $ | Book Value $ | |
| Original Book Value | 2,25,000 | 1,00,000 | 3,25,000 |
| Add : Net Income | 75,000 | 75,000 | |
| ( as above) | |||
| Less : dividend | (20,000) | (20,000) | |
| ( as above) | |||
| Closing Book Value | 2,25,000 | 1,55,000 | 3,80,000 |
All below numbers as per Questions . Debit/ credit - represents adjustment - Elimination of entries at the time of consolidation . Income from Rebecca will not appear in consolidate report
Dividend declared also knocked off to extent of Rebeca
Investment of Rebecca - also knocked off at consolidated level
Common stock of rebecca - Knocked off at consolidated level
Opening retain Balance adjustment to extent of rebecca
Retained earnings derived and eliminated at consolidated level ( Income + Divided )
| Adjust Consolidation | |||||
| Pauline ($) | Rebecca($) | Debit ($) | Credit ($) | Consolidated($) | |
| Sales | 8,00,000 | 2,50,000 | 10,50,000 | ||
| COGS | (2,00,000) | (1,25,000) | (3,25,000) | ||
| Depreciation Expenses | (50,000) | (10,000) | (60,000) | ||
| Other Expenses | (2,25,000) | (40,000) | (2,65,000) | ||
| Income from Rebecca | 75,000 | 75,000 | - | ||
| Net Income | 4,00,000 | 75,000 | 75,000 | - | 4,00,000 |
| Statement Retained Earnings | |||||
| Opening balance | 2,25,000 | 1,00,000 | 1,00,000 | 2,25,000 | |
| Net Income | 4,00,000 | 75,000 | 75,000 | 4,00,000 | |
| Dividen Declared | (1,00,000) | (20,000) | 20,000 | (1,00,000) | |
| Closing Balance | 5,25,000 | 1,55,000 | 1,75,000 | 20,000 | 5,25,000 |
| Cash | 1,30,000 | 80,000 | 2,10,000 | ||
| Account Receivable | 1,65,000 | 65,000 | 2,30,000 | ||
| Inventory | 2,00,000 | 75,000 | 2,75,000 | ||
| Investment in rebecca | 3,55,000 | 3,55,000 | - | ||
| Land | 2,00,000 | 1,00,000 | 3,00,000 | ||
| Building & Equipment | 7,00,000 | 2,00,000 | 9,00,000 | ||
| Accumulated depreciaiton | (4,50,000) | (20,000) | (4,70,000) | ||
| Total Asset | 13,00,000 | 5,00,000 | - | 3,55,000 | 14,45,000 |
| Account payable | 75,000 | 60,000 | 1,35,000 | ||
| Bond Payable | 2,00,000 | 85,000 | 2,85,000 | ||
| Common Stock | 5,00,000 | 2,00,000 | 2,00,000 | 5,00,000 | |
| Retained Earnings | 5,25,000 | 1,55,000 | 1,75,000 | 20,000 | 5,25,000 |
| Total Liability | 13,00,000 | 5,00,000 | 3,75,000 | 20,000 | 14,45,000 |
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