Question : 87. On January 1, Year 1, Plano Co. purchased for $180,000, : 1245744

 

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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