Consolidated Worksheet and Balance Sheet on the Acquisition Date (Equity Method)
Paper Company acquired 80 percent of Scissor Company’s outstanding common stock for $296,000 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 January 1, 20X8, are as follows:
| Paper Company | ScissorCompany |
Assets |
|
|
Cash | 109,000 | 25,000 |
Accounts Receivable | 65,000 | 37,000 |
Inventory | 125,000 | 87,000 |
Investment in Scissor Stock | 296,000 |
|
Land | 280,000 | 125,000 |
Buildings and Equipment | 875,000 | 250,000 |
Accumulated Depreciation | (500,000) | (24,000) |
Total Assets | 1,250,000 | 500,000 |
Liabilities and Stockholders’ Equity |
|
|
Accounts Payable | 95,000 | 30,000 |
Bonds Payable | 250,000 | 100,000 |
Common Stock | 625,000 | 250,000 |
Retained Earnings | 280,000 | 120,000 |
Total Liabilities and Equity | 1,250,000 | 500,000 |
Required
a. Prepare the journal entry on Paper’s books for the acquisition of Scissor Co. on January 1, 20X8.
b. Prepare a consolidation worksheet on the acquisition date, January 1, 20X8, in good form.
c. Prepare a consolidated balance sheet on the acquisition date, January 1, 20X8, in good form.
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