Consolidated Worksheet at End of the Second Year of Ownership (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. Problem 3-36 summarizes the first year of Paper’s ownership of Scissor. Paper uses the equity method to account for investments. The following trial balance summarizes the financial position and operations for Paper and Scissor as of December 31, 20X9:
| Paper Company | Scissor Company | ||||
Debit | Credit | Debit | Credit | |||
Cash | 295,000 |
| 116,000 |
| ||
Accounts Receivable | 165,000 |
| 97,000 |
| ||
Inventory | 193,000 |
| 115,000 |
| ||
Investment in Scissor Stock | 412,000 |
| 0 |
| ||
Land | 250,000 |
| 125,000 |
| ||
Buildings and Equipment | 875,000 |
| 250,000 |
| ||
Cost of Goods Sold | 278,000 |
| 178,000 |
| ||
Depreciation Expense | 65,000 |
| 12,000 |
| ||
Selling&Administrative Expense | 312,000 |
| 58,000 |
| ||
Dividends Declared | 90,000 |
| 30,000 |
| ||
Accumulated Depreciation |
| 630,000 |
| 48,000 | ||
Accounts Payable |
| 85,000 |
| 40,000 | ||
| Paper Company | Scissor Company | ||||
Debit | Credit | Debit | Credit | |||
Bonds Payable |
| 150,000 |
| 100,000 | ||
Common Stock |
| 625,000 |
| 250,000 | ||
Retained Earnings |
| 479,400 |
| 188,000 | ||
Sales |
| 880,000 |
| 355,000 | ||
Income from Scissor |
| 85,600 |
| 0 | ||
Total | 2,935,000 | 2,935,000 | 981,000 | 981,000 | ||
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Required
a. Prepare any equity method journal entry(ies) related to the investment in Scissor Company during 20X9.
b.Prepare a consolidation worksheet for 20X9 in good form.
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