Question

Peanut Company acquired 100 percent of Snoopy Company's outstanding common stock for $304,000 on January 1, 20x8, when the book value of Snoopy's net assets was equal to $304,000. Accumulated depreciation on this date was $12,000. 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, 20X9233 186,880 60,880 12. 12.000 Peanut Company Snoopy Company Debit Credit Debit Credit Cash $ 238,0003333333 $ 77,280 Accounts Receivable 90,000 Inventory 183,800 107,898 Investment in Snoopy 304,000 e Company 333 Land 209,000 Buildings & Equipment 704,000 333212,800 Cost of Goods Sold 277,280 145,000 Depreciation Expense Selling & 79,008 Administrative Expense Dividends Declared Accumulated $ 36,000 Depreciation Accounts Payable 24,000 Bonds Payable 71,000 Common Stock 184,000 Retained Earnings 248,000 Sales 297,000 Dividend Income Total $2,648,000 $2,643,000 $360,000 $ 860,000 231,089 228, 29 -2, 0

Answer 1

a. No Journal entries required in the case of consolidated Financial Statement because Dividend is an income for Peanut Company and expense for Snoopy Company, So the final impact in Nil. The common practice is not to inflate the Financila statements with those entries.

b.

USD $	Peanut Co	Snoopy Co	Total	Dr	Cr	Consolidated
Sales	$848,000	$297,000	$1,145,000			$1,145,000
-COGS	($277,000)	($145,000)	($422,000)			($422,000)
-Depreciation exp	($60,000)	($12,000)	($72,000)			($72,000)
-Selling & Administrative exp	($231,000)	($79,000)	($310,000)			($310,000)
Dividend Income	$32,000	($32,000)	$0			$0
Net Income	$312,000	$29,000	$341,000			$341,000
STATEMENT OF RETAINED EARNINGS
Balance	$557,000	$248,000	$805,000			$805,000
Add Net Income	$312,000	$29,000	$341,000			$341,000
less Dividend declared	($228,000)	$0	($228,000)			($228,000)
Ending Balance	$641,000	$277,000	$918,000			$918,000
Balance Sheet
Cash	$238,000	$77,000	$315,000			$315,000
Accounts Receivable	$214,000	$90,000	$304,000			$304,000
Inventory	$183,000	$107,000	$290,000			$290,000
Investment In Snoopy Co	$304,000	$0	$304,000			$304,000
Land	$209,000	$106,000	$315,000			$315,000
Building	$704,000	$212,000	$916,000			$916,000
Less Accumulated Depreciation	($520,000)	($36,000)	($556,000)			($556,000)
Total Assets	$1,332,000	$556,000	$1,888,000			$1,888,000
Liabilities & Equity
Accounts Payable	$59,000	$24,000	$83,000			$83,000
Bonds Payable	$147,000	$71,000	$218,000			$218,000
Common Stock	$669,000					$669,000
Retained Earnings	$641,000	$277,000				$918,000
Total Liability & Equity	1,516,000	$372,000				$1,888,000