Paper Company acquired 80 percent of Scissor Company’s outstanding common stock for $296,000 on January 1, 20X8, when the book value of Scissor’s net assets was equal to $370,000. Paper uses the equity method to account for investments. Trial balance data for Paper and Scissor as of December 31, 20X8, are as follows: Paper Company Scissor Company Debit Credit Debit Credit Cash $ 191,000 $ 46,000 Accounts Receivable 140,000 60,000 Inventory 190,000 120,000 Investment in Scissor Company 350,400 0 Land 250,000 125,000 Buildings and Equipment 875,000 250,000 Cost of Goods Sold 250,000 155,000 Depreciation Expense 65,000 12,000 Selling & Administrative Expense 280,000 50,000 Dividends Declared 80,000 25,000 Accumulated Depreciation $ 565,000 $ 36,000 Accounts Payable 77,000 27,000 Bonds Payable 250,000 100,000 Common Stock 625,000 250,000 Retained Earnings 280,000 120,000 Sales 800,000 310,000 Income from Scissor Company 74,400 0 Total $ 2,671,400 $ 2,671,400 $ 843,000 $ 843,000 Required: Prepare any equity method entry(ies) related to the investment in Scissor Company during 20X8. Prepare a consolidation worksheet for 20X8. Assume the company prepares the optional Accumulated Depreciation Consolidation Entry.
Paper Company acquired 80 percent of Scissor Company’s outstanding common stock for $296,000 on January 1, 20X8, when the book value of Scissor’s net assets was equal to $370,000. Paper uses the equity method to account for investments. Trial balance data for Paper and Scissor as of December 31, 20X8, are as follows: Paper Company Scissor Company Debit Credit Debit Credit Cash $ 191,000 $ 46,000 Accounts Receivable 140,000 60,000 Inventory 190,000 120,000 Investment in Scissor Company 350,400 0 Land 250,000 125,000 Buildings and Equipment 875,000 250,000 Cost of Goods Sold 250,000 155,000 Depreciation Expense 65,000 12,000 Selling & Administrative Expense 280,000 50,000 Dividends Declared 80,000 25,000 Accumulated Depreciation $ 565,000 $ 36,000 Accounts Payable 77,000 27,000 Bonds Payable 250,000 100,000 Common Stock 625,000 250,000 Retained Earnings 280,000 120,000 Sales 800,000 310,000 Income from Scissor Company 74,400 0 Total $ 2,671,400 $ 2,671,400 $ 843,000 $ 843,000 Required: Prepare any equity method entry(ies) related to the investment in Scissor Company during 20X8. Prepare a consolidation worksheet for 20X8. Assume the company prepares the optional Accumulated Depreciation Consolidation Entry.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Paper Company acquired 80 percent of Scissor Company’s outstanding common stock for $296,000 on January 1, 20X8, when the book value of Scissor’s net assets was equal to $370,000. Paper uses the equity method to account for investments.
Paper Company | Scissor Company | |||
---|---|---|---|---|
Debit | Credit | Debit | Credit | |
Cash | $ 191,000 | $ 46,000 | ||
Accounts Receivable | 140,000 | 60,000 | ||
Inventory | 190,000 | 120,000 | ||
Investment in Scissor Company | 350,400 | 0 | ||
Land | 250,000 | 125,000 | ||
Buildings and Equipment | 875,000 | 250,000 | ||
Cost of Goods Sold | 250,000 | 155,000 | ||
65,000 | 12,000 | |||
Selling & Administrative Expense | 280,000 | 50,000 | ||
Dividends Declared | 80,000 | 25,000 | ||
$ 565,000 | $ 36,000 | |||
Accounts Payable | 77,000 | 27,000 | ||
Bonds Payable | 250,000 | 100,000 | ||
Common Stock | 625,000 | 250,000 | ||
Retained Earnings | 280,000 | 120,000 | ||
Sales | 800,000 | 310,000 | ||
Income from Scissor Company | 74,400 | 0 | ||
Total | $ 2,671,400 | $ 2,671,400 | $ 843,000 | $ 843,000 |
Required:
-
Prepare any equity method entry(ies) related to the investment in Scissor Company during 20X8.
- Prepare a consolidation worksheet for 20X8. Assume the company prepares the optional Accumulated Depreciation Consolidation Entry.
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