29 Jun Gain on Sale of Equipment 61,000 21,000 Earnings from Investment in subsidiary Interest Revenue 2,880 2,880 Interest Expense
Question
1. Account balances are as of December 31, 20X3 except where noted.
SelectedIncome Statement Amounts:
Pipe
Match
$710,000
$530,000
Sales
Cost of Goods Sold
490,000
370,000
Gain on Sale of Equipment
61,000
21,000
Earnings from Investment in subsidiary
Interest Revenue
2,880
2,880
Interest Expense
25,000
Depreciation
20,000
SelectedBalance Sheet Amounts {Debits/(Credits)}:
$ 50,000
$ 15,000
Cash
Notes Receivable
36,000
150,000
Inventories
229,000
Equipment
440,000
360,000
Accumulated Depreciation
(200,000)
(120,000)
Investment in Shaw
189,000
(36,000)
Notes Payable
(100,000)
Common Stock
(10,000)
Additional paid-in-capital
(250,000)
(40,000)
Retained Earnings
(402,000)
(140,000)
SelectedStatement of Retained Earnings Amounts:
$ 272,000
$ 100,000
Beginning Balance, December 31, x2
Net Income
210,000
70,000
Dividends Paid
80,000
30,000
Additional Information:
On January 2, 20X3 Pipe purchased 90% of Match for $155,000. On that date Match’s shareholders’ equity equaled $150,000 and the fair values of Match’s assets and liabilities equaled their carrying amounts. Excess, if any, is attributed to patents and is amortized over 10 years.
On September 4, 20X3 Match paid cash dividends of $30,000.
On January 3, 20X3 Match sold equipment with an original cost of $30,000 and a carrying value of $15,000 to Pipe for $36,000. The equipment had a remaining useful life of 3 years. Straight-line depreciation is used.
On January 4, 20X3 Match signed an 8% Note Payable. All interest payments were made as of December 31, 20X3.
During the year Match sold merchandise to Pipe for $60,000, which included a profit of $20,000. At year end 50% of the merchandise remained in Pipe’s inventory.
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