Comprehensive Problem: Wholly Owned Subsidiary
Power Corporation acquired 100 percent ownership of Upland Products Company on January 1, 20X1, for $200,000. On that date Upland reported retained earnings of $50,000 and had $100,000 of common stock outstanding. Power has used the equity-method in accounting for its investment in Upland.
Trial balance data for the two companies on December 31, 20X5 (on the next page).
Additional Information
1. On the date of combination, the fair value of Upland’s depreciable assets was $50,000 more than book value. The differential assigned to depreciable assets should be written off over the following 10-year period.
2. There was $10,000 of intercorporate receivables and payables at the end of 20X5. Required
a.Give all journal entries that Power recorded during 20X5 related to its investment in Upland.
b.Give all eliminating entries needed to prepare consolidated statements for 20X5.
c.Prepare a three-part worksheet as of December 31, 20X5.
| Power | Upland | ||
| Corporation | Products Company | ||
Item | Debit | Credit | Debit | Credit |
Cash and Receivables | $ 43,000 |
| $ 65,000 |
|
Inventory | 260,000 |
| 90,000 |
|
Land | 80,000 |
| 80,000 |
|
Buildings and Equipment | 500,000 |
| 150,000 |
|
Investment in Upland Products Stock | 235,000 |
|
|
|
Cost of Goods Sold | 120,000 |
| 50,000 |
|
Depreciation Expense | 25,000 |
| 15,000 |
|
Inventory Losses | 15,000 |
| 5,000 |
|
Dividends Declared | 30,000 |
| 10,000 |
|
Accumulated Depreciation |
| $ 205,000 |
| $105,000 |
Accounts Payable |
| 60,000 |
| 20,000 |
Notes Payable |
| 200,000 |
| 50,000 |
Common Stock |
| 300,000 |
| 100,000 |
Retained Earnings |
| 318,000 |
| 90,000 |
Sales |
| 200,000 |
| 100,000 |
Income from Subsidiary |
| 25,000 |
|
|
| $1,308,000 | $1,308,000 | $465,000 | $465,000 |
We need at least 10 more requests to produce the solution.
0 / 10 have requested this problem solution
The more requests, the faster the answer.