Question : 77. On January 1, Year 1, Photo Co. purchased for $180,000, : 1230372

 

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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