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Exercise 4-6 Part A: Journal Entries Investment in Sales 350,000 Cash 350,000 Investment

Exercise 4-6 Part A: Journal Entries Investment in Sales 350,000 Cash 350,000 Investment in Sales ($148,000)(.85) 125,800 Equity in Subsidiary Income 125,800 Cash ($50,000)(.85 ) 42,500 Investment in Sales 42,500

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Exercise 4-6 Part A: Journal Entries Investment in Sales 350,000 Cash 350,000 Investment

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  1. Exercise 4-6 Part A: Journal Entries Investment in Sales 350,000 Cash 350,000 Investment in Sales ($148,000)(.85) 125,800 Equity in Subsidiary Income 125,800 Cash ($50,000)(.85) 42,500 Investment in Sales 42,500 To account for reduction in equity due to dividends

  2. Part B:Workpaper Entries 1- Equity income- Sales Company 125,800 Investment in Sales 125800 2- Investment 42500 Dividends declared 42500 3-Common Stock 100,000 Other Contributed Capital 40,000 Retained Earnings 1/1 140,000 Difference (IV and BV) 131,765 Investment in Sales 350,000 NoncontrollingInterest 61,765

  3. 4- Land 131,765 Difference (IV and BV) 131,765

  4. Exercise 4-7 Part A: Journal Entries _2010 Investment in Sales (.85)($190,000) 161,500 Equity in Subsidiary Income 161,500 Cash 42,500 Investment in Sales (.85)($50,000) 42,500

  5. Part B:Workpaper Entries 1-Equity in Subsidiary Income 161,500 Investment in Sales 161500 2- Investment 42500 Dividends Declared 42500 3- Common Stock 100,000 Other Contributed Capital 40,000 Retained Earnings 1/1 * 238,000 Difference (IV and BV) 131,765 Investment in Sales ($350,000 + $83,300**) 433,300 NCI ($61,765 + $14,700***) 76,465 * $140,000 + ($148,000 - $50,000) ** ($148,000 - $50,000) x .85 *** ($148,000 - $50,000) x .15

  6. 4- Land 131,765 Difference (IV and BV) 131,765

  7. Exercise 4-10 Part A : Journal Entries 1- Investment in Star 210,000 Cash 210,000 2- Investment in Star (0.90 ( (3/12) ( $60,000) 13,500 Equity in Subsidiary Income 13,500 3-Cash (0.90 ( $10,000) 9,000 Investment in Star 9,000 To account for reduction in equity due to dividends

  8. Part B:Workpaper Entries 1- Equity in Subsidiary Income 13,500 Investment in Star 13500 2- Investment in Star 9000 Dividends declared 9000 3- Common Stock - Star 70,000 Other Contributed Capital – Star 30,000 Retained Earnings – Star * 115,000 Difference between Implied and Book Value ** 18,333 Investment in Star 210,000 Noncontrolling Interest 23,333

  9. 4- Goodwill 18,333 Difference (Implied and Book Value) 18,333 * Retained earnings on 10/1/10 Retained earnings on 1/1/10 $ 70,000 Income purchased to 10/1/10 (9/12 x $60,000) 45,000 Retained earnings on 10/1/10 $ 115,000

  10. Exercise 4-10 Part A : Journal Entries 1- Investment in Star 210,000 Cash 210,000 2- Investment in Star (0.90 ( (3/12) ( $60,000) 13,500 Equity in Subsidiary Income 13,500 3-Cash (0.90 ( $10,000) 9,000 Investment in Star 9,000 To account for reduction in equity due to dividends

  11. Part C:Workpaper Entries- Full year reporting alternative 1- Equity in Subsidiary Income 13,500 Investment in Star 13500 2- Investment in Star 9000 Dividends declared 9000 3-Common Stock - Star 70,000 Other Contributed Capital 30,000 Retained Earnings 70,000 Purchased Income 45,000 Difference (Implied and Book Value) 18,333 Investment in Star 210,000 Noncontrolling Interest $23,333

  12. 4- Goodwill 18,333 Difference (Implied and Book Value) 18,333

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