77. On January 1, Year 1, Photo Co. purchased for $180,000, 90% of Snake Co. at a time when Snake had a book value of $200,000. There were no intercompany transactions during year 4.
CONDENSED BALANCE SHEETSAs of December 31, Year 4
Assets
Photo
Snake
Accounts receivable
$ 50,000
$ 40,000
Investment in Snake (equity)
270,000
–
Other assets
1,680,000
710,000
Total assets
$2,000,000
$750,000
Liabilities and Equity
Accounts payable
$ 40,000
$ 50,000
Other liabilities
1,360,000
400,000
Common stock
200,000
200,000
Retained earnings
400,000
100,000
Total liabilities and equity
$2,000,000
$750,000
CONDENSED INCOME STATEMENTfor Current Year
Photo
Snake
Sales
$800,000
$200,000
Equity in earnings of Snake
18,000
–
Total revenues
$818,000
$200,000
Cost of goods sold
500,000
$120,000
Depreciation
100,000
30,000
Other expenses
78,000
20,000
Tax expense
40,000
10,000
Total expenses
$718,000
$180,000
Net income
$100,000
$ 20,000
Required:Prepare the appropriate elimination and reclassification entries necessary to prepare a consolidated balance sheet and income statement.
78. Given the following separate company balance sheets and income statements, answer the following questions.
CONDENSED BALANCE SHEETSAs of December 31, Year 4
Assets
Plant
Scone
Accounts receivable
$ 50,000
$ 40,000
Investment in Scone (equity)
300,000
–
Other assets
1,680,000
710,000
Total assets
$2,030,000
$750,000
Liabilities and Equity
Accounts payable
$ 70,000
$ 50,000
Other liabilities
1,360,000
400,000
Common stock
200,000
200,000
Retained earnings
400,000
100,000
Total liabilities and equity
$2,030,000
$750,000
CONDENSED INCOME STATEMENTfor the year ended December 31, Year 4
Plant
Scone
Sales
$800,000
$200,000
Equity in earnings of Scone
20,000
–
Total revenues
$820,000
$200,000
Cost of goods sold
$500,000
$120,000
Depreciation
100,000
30,000
Other expenses
80,000
20,000
Tax expense
40,000
10,000
Total expenses
$720,000
$180,000
Net income
$100,000
$ 20,000
Additional information:Plant acquired its investment in the stock of Scone on the date of Scone’s incorporation.Consolidated accounts receivable is $80,000.Consolidated sales total $900,000.No purchases from Scone remain in Plant’s ending inventory.Required:
a.
What percentage of Scone does Plant appear to own?
b.
What is beginning retained earnings of Plant?
c.
How much was Plant’s initial investment in Scone?
d.
What is the amount of intercompany accounts receivable?
e.
What is consolidated cost of goods sold?
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