Homework Answers
| Adjustment entries | |||||
| Rand Corp | Spaulding Inc | Debit | Credit | Consolidation | |
| Revenue | 372000 | 108000 | 480000 | ||
| Expense | -264000 | -72000 | -11000 | -347000 | |
| Equity in subsidiary earnings | 25000 | 25000 | 0 | ||
| Net income | 133000 | 36000 | 133000 | ||
| Retained reanings | 765000 | 102000 | 102000 | 765000 | |
| Net income | 133000 | 36000 | 36000 | 133000 | |
| Dividends paid | -84000 | -24000 | 24000 | -84000 | |
| Retained earnings, Dec 2012 | 814000 | 114000 | 814000 | ||
| Current Asstes | 150000 | 22000 | 172000 | ||
| Investment in Spaulding Inc | 242000 | 0 | 242000 | 0 | |
| Building net | 525000 | 85000 | 6000 | 604000 | |
| Equipment net | 389250 | 129000 | 5000 | 513250 | |
| Goodwill | 67000 | 67000 | |||
| Total assets | 1306250 | 236000 | 1356250 | ||
| Liabilities | 82250 | 50000 | 132250 | ||
| Common Stock | 360000 | 72000 | -72000 | 360000 | |
| Additional paid in capital | 50000 | 0 | 50000 | ||
| Retained earnings | 814000 | 114000 | -102000 | 814000 | |
| Total liabilities and stock holders' equity | 1306250 | 236000 | 1356250 |
| Consolidation entries | ||
| Excess depreciation on building | =60000/10 | |
| 6000 | ||
| excess depreciation on equipment | =25000/5 | |
| 5000 | ||
| Net income | 36000 | |
| Dividends | 24000 | |
| Investment in spaulding | 25000 | |
| To equity in subsidiary earnings | 25000 | |
| Cash | 24000 | |
| To Investment in spaulding | 24000 |
consolidation entries
| Equity in subsidiary | 25000 | |
| To investment in subsidiary | 1000 | |
| To dividend paid | 24000 | |
| Common stock | 72000 | |
| retained earnings beginning | 102000 | |
| Difference (cost & book) | 67000 | |
| To investment in subsidiary | 241000 | |
| Goodwill | 67000 | |
| To Difference in (cost & book) | 67000 | |
| Depreciation | 11000 | |
| To Land | 6000 | |
| To equipment | 5000 |
Under partial equity method the excess of amortisatiob/depreciation is not taken into consideration, only adjustments related to net income and dividends are done
Hence,assuming profit, investment in subsidiary and dividends remain same
| Equity in subsidiary | 36000 | |
| To investment in subsidiary | 12000 | |
| To dividend paid | 24000 | |
| Common stock | 72000 | |
| retained earnings beginning | 114000 | |
| Difference (cost & book) | 44000 | |
| To investment in subsidiary | 230000 | |
| Goodwill | 44000 | |
| To Difference in (cost & book) | 44000 |
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