Softball Corporation reported the following balances at January 1, 20X9: Item Book Value Fair Value Cash...
Softball Corporation reported the following balances at January
1, 20X9:
| Item | Book Value | Fair Value | |||||||
| Cash | $ | 55,000 | $ | 55,000 | |||||
| Accounts Receivable | 61,000 | 61,000 | |||||||
| Inventory | 115,000 | 138,000 | |||||||
| Buildings and Equipment | 306,000 | 244,000 | |||||||
| Less: Accumulated Depreciation | (163,000 | ) | |||||||
| Total Assets | $ | 374,000 | $ | 498,000 | |||||
| Accounts Payable | $ | 56,000 | $ | 56,000 | |||||
| Common Stock ($9 par value) | 82,000 | ||||||||
| Additional Paid-In Capital | 25,000 | ||||||||
| Retained Earnings | 211,000 | ||||||||
| Total Liabilities and Equities | $ | 374,000 | |||||||
On January 1, 20X9, Pitcher Corporation purchased 100 percent of
Softball's stock. All tangible assets had a remaining economic life
of 5 years at January 1, 20X9. Both companies use the FIFO
inventory method. Softball reported net income of $32,000 in 20X9
and paid dividends of $3,600. Pitcher uses the equity method in
accounting for its investment in Softball.
Required:
Prepare all journal entries that Pitcher recorded during 20X9 with
respect to its investment assuming Pitcher paid $476,500 for the
ownership of Softball on January 1, 20X9. The amount of the
differential assigned to goodwill is not impaired. (If no
entry is required for a transaction/event, select "No journal entry
required" in the first account field.)
Journal Entries:
Record the purchase of Softball.
Record the dividend received from Softball.
Record the equity-method income/loss.
Record the amortization of the differential assigned to inventory carried on a FIFO basis.
Record the amortization of the differential assigned to buildings and equipment.
Homework Answers
| Required Journal Entries: | |||
| Sl. N0. | Particulars | Dr ($) | Cr ($) |
| 1 | Record the purchase of Softball. | 318000 | |
| Investment in Softball | 158500 | ||
| Goodwill | 476500 | ||
| To Cash/ bank | |||
| (Being purchase of softball recorded) | |||
| 2 | Record the dividend received from Softball. | ||
| Cash/ Bank | 3600 | ||
| To Dividend income | 3600 | ||
| (Being dividend received from softball) | |||
| 3 | Record the equity-method income/loss. | ||
| Investment in softball | 28400 | ||
| To Net Income | 28400 | ||
| (Being net income recorded under equity method) | |||
| 4 | Record the amortization of the differential assigned to inventory carried on a FIFO basis. | ||
| No Journal Entry required | |||
| 5 | Record the amortization of the differential assigned to buildings and equipment. | ||
| No Journal Entry required | |||
Add Answer to:
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