Consolidated Worksheet at End of the First Year of Ownership (Equity Method)
Peanut Company acquired 90 percent of Snoopy Company’s outstanding common stock for $270,000 on January 1, 20X8, when the book value of Snoopy’s net assets was equal to $300,000. Peanut uses the equity method to account for investments. Trial balance data for Peanut and Snoopy as of December 31, 20X8, are as follows:
| Peanut Company | Snoopy Company | ||
Debit | Credit | Debit | Credit | |
Cash | 158,000 |
| 80,000 |
|
Accounts Receivable | 165,000 |
| 65,000 |
|
Inventory | 200,000 |
| 75,000 |
|
Investment in Snoopy Stock | 319,500 |
| 0 |
|
Land | 200,000 |
| 100,000 |
|
Buildings and Equipment | 700,000 |
| 200,000 |
|
Cost of Goods Sold | 200,000 |
| 125,000 |
|
Depreciation Expense | 50,000 |
| 10,000 |
|
Selling&Administrative Expense | 225,000 |
| 40,000 |
|
Dividends Declared | 100,000 |
| 20,000 |
|
Accumulated Depreciation |
| 450,000 |
| 20,000 |
Accounts Payable |
| 75,000 |
| 60,000 |
Bonds Payable |
| 200,000 |
| 85,000 |
Common Stock |
| 500,000 |
| 200,000 |
Retained Earnings |
| 225,000 |
| 100,000 |
Sales |
| 800,000 |
| 250,000 |
Income from Snoopy |
| 67,500 |
| 0 |
Total | 2,317,500 | 2,317,500 | 715,000 | 715,000 |
Required
a. Prepare thejournal entries on Peanut’s books for the acquisition of Snoopy on January 1,20X8, as well as any normal equity method entry(ies) related to the investment in Snoopy Company during 20X8.
b. Prepare a consolidation worksheet for 20X8 in good form.
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