Consolidated Worksheet at End of the First Year of Ownership (Equity Method)
Paper Company acquired 100 percent of Scissor Company’s outstanding common stock for $370,000 on January 1, 20X8, when the book value of Scissor’s net assets was equal to $370,000. Paper uses the equity method to account for investments. Trial balance data for Paper and Scissor as of December 31, 20X8, are as follows:
| Paper Company | Scissor Company | ||
Debit | Credit | Debit | Credit | |
Cash | $ 122,000 |
| $ 46,000 |
|
Accounts Receivable | 140,000 |
| 60,000 |
|
Inventory | 190,000 |
| 120,000 |
|
Investment in Scissor Stock | 438,000 |
| 0 |
|
Land | 250,000 |
| 125,000 |
|
Buildings and Equipment | 875,000 |
| 250,000 |
|
Cost of Goods Sold | 250,000 |
| 155,000 |
|
Depreciation Expense | 65,000 |
| 12,000 |
|
Selling&Administrative Expense | 280,000 |
| 50,000 |
|
Dividends Declared | 80,000 |
| 25,000 |
|
Accumulated Depreciation |
| $ 565,000 |
| $ 36,000 |
Accounts Payable |
| 77,000 |
| 27,000 |
Bonds Payable |
| 250,000 |
| 100,000 |
Common Stock |
| 625,000 |
| 250,000 |
Retained Earnings |
| 280,000 |
| 120,000 |
Sales |
| 800,000 |
| 310,000 |
Income from Scissor |
| 93,000 |
| 0 |
Total | $2,690,000 | $2,690,000 | $843,000 | $843,000 |
Required
a. Prepare the journal entries on Paper’s books for the acquisition of Scissor on January 1, 20X8 as well as any normal equity method entry(ies) related to the investment in Scissor Company during 20X8.
b. Prepare a consolidation worksheet for 20X8 in good form.
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