29 Jun Question 13. On January 1, 20X1, Parent Co
Question
13. On January 1, 20X1, Parent Company purchased 90% of the common stock of Sub-A Company for $90,000. On this date, Sub-A had common stock, other paid-in capital, and retained earnings of $10,000, $20,000, and $60,000 respectively.
On January 1, 20X2, Sub-A Company purchased 80% of the common stock of Sub-B Company for $68,000. On this date, Sub-B Company had common stock, other paid-in capital, and retained earnings of $5,000, $30,000, and $40,000 respectively.
Any excess of cost over book value on either purchase is due to a patent, to be amortized over ten years.
Both Parent and Sub-A have accounted for their investments using the cost method.
On December 31, 20X1, Parent sold used equipment to Sub-A Company. The equipment had a cost of $45,000 and accumulated depreciation of $20,000. The sale price was $30,000. During 20X2 and 20X3, Sub-A used the equipment, depreciating it over five years using the straight-line method.
During 20X2, Sub-B sold merchandise to Sub-A for $20,000, of which one-fourth is still held by Sub-B on December 31, 20X2. Sub-B’s usual gross profit is 40%. During 20X3, Sub-B sold more goods to Sub-A for $30,000, of which $10,000 is still on hand on December 31, 20X3.
Required:
Complete the Figure 8-10 worksheet for consolidated financial statements for 20X3.
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Chapter 8
19. On January 1, 20X1, Sub-A Company purchased 80% of the common stock of Sub-B Company for $56,000, a price equal to book value. On this date, Sub-B Company had common stock, other paid-in capital, and retained earnings of $5,000, $30,000, and $35,000 respectively.
On January 1, 20X2, Parent Company purchased 90% of the common stock of Sub-A Company for $108,000. On this date, Sub-A had common stock, other paid-in capital, and retained earnings of $10,000, $20,000, and $80,000 respectively. Any excess of cost over book value is due to a patent, to be amortized over 10 years.
Both Parent and Sub-A have accounted for their investments using the simple equity method.
During 20X2, Sub-B sold merchandise to Sub-A for $20,000, of which one-fourth is still held by Sub-B on December 31, 20X2. Sub-B’s usual gross profit is 40%. During 20X3, Sub-B sold more goods to Sub-A for $30,000, of which $10,000 is still on hand on December 31, 20X3.
Required:
Complete the Figure 8-11 worksheet for consolidated financial statements for 20X3.
8-31
8-32
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