87. On January 1, Year 1, Plano Co. purchased for $180,000, 90% of Santa Fe Co. at a time when Santa Fe had a book value of $200,000. There were no intercompany transactions during year 4.
CONDENSED BALANCE SHEETSAs of December 31, Year 4
Accounts receivable
$ 50,000
$ 40,000
Investment in Santa Fe (equity)
270,000
–
Other assets
Total assets
Liabilities and Equity
Accounts payable
$ 40,000
$ 50,000
Other liabilities
1,360,000
400,000
Common stock
200,000
200,000
Retained earnings
Total liabilities and equity
CONDENSED INCOME STATEMENTfor Current Year
Sales
$800,000
$200,000
Equity in earnings of Santa Fe
Total revenues
Cost of goods sold
500,000
$120,000
Depreciation
100,000
30,000
Other expenses
78,000
20,000
Tax expense
Total expenses
Net income
Required:Prepare the appropriate elimination and reclassification entries necessary to prepare a consolidated balance sheet and income statement.
88. Given the following separate company balance sheets and income statements, answer the following questions.
CONDENSED BALANCE SHEETSAs of December 31, Year 4
Accounts receivable
$ 50,000
$ 40,000
Investment in Settle (equity)
300,000
–
Other assets
Total assets
Liabilities and Equity
Accounts payable
$ 70,000
$ 50,000
Other liabilities
1,360,000
400,000
Common stock
200,000
200,000
Retained earnings
Total liabilities and equity
CONDENSED INCOME STATEMENTfor the year ended December 31, Year 4
Sales
$800,000
$200,000
Equity in earnings of Settle
Total revenues
Cost of goods sold
$500,000
$120,000
Depreciation
100,000
30,000
Other expenses
80,000
20,000
Tax expense
Total expenses
Net income
Additional information:Plea acquired its investment in the stock of Settle on the date of Settle’s incorporation.Consolidated accounts receivable is $80,000.Consolidated sales total $900,000.No purchases from Settle remain in Plea’s ending inventory.Required:
a.
What percentage of Settle does Plea appear to own?
b.
What is beginning retained earnings of Plea?
c.
How much was Plea’s initial investment in Settle?
d.
What is the amount of intercompany accounts receivable?
e.
What is consolidated cost of goods sold?
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