Prepare the journal entries for power

Assignment Help Accounting Basics
Reference no: EM13720973

Power Corporation acquired 80% of Snyder Company's 1,250 shares of outstanding $100 par common stock on July 1, 2015 for $158,600.  The excess of the current fair value of Snyder's identifiable net assets over the carrying amounts on July 1, 2015, was attributable as follows:

                                                To inventories (fifo)                                        $4,000

                                                To equipment

                                                (five year remaining life)                         4,000

In addition, on July 1, 2015, Power acquired in the open market for $37,000, $40,000 of Snyder Company's 6% bonds payable at a yield of 7%.  Interest is payable by Snyder each June 30 and December 31.

Separate financial statements for Power Corporation and Snyder Company for the periods ended December 31, 2015, were as follows:

                                                                                                                Power                                   Snyder

                                                                                                         (year ended                       (six months

                                                                                                          12/31/2015)                  ended 12/31/2015)

Revenue:

                Net Sales                                                                          $961,905                 $505,000

                Interest Revenue                                                                 1,295                               

                Income of Subsidiary                                                        16,000                           _______

                                                                                                                $979,200                              $505,000

Cost/Expenses/Losses:

                Cost of Goods Sold                                                          $780,000                              $380,000

                Operating Expenses                                                         114,140                                 102,450

                Interest Expense                                                                                                                   2,550

                Loss on Sale of Equipment                                                 2,000                             _______

                                                                                                                $896,140                              $485,000       

                                Net Income                                                          $83,060                                  $20,000

 

Retained Earnings, Beginning of Period                                  $220,000                                $50,000

Add:  Net Income                                                                                83,060                                   20,000

                Subtotal                                                                               $303,060                                $70,000

Less:  Dividends Declared                                                                 36,000                                     9,000

Retained Earnings, End of Period                                              $267,060                                $61,000

 

 

Assets

Intercompany Accounts Receivable                                               $100                    

Inventory (fifo)                                                                                 300,000                                $75,000

Investment in Snyder Stock                                                        167,400

Investment in Snyder Bonds                                                          37,125

Plant Assets                                                                                       794,000                                280,600

Accumulated Depreciation on Plant Assets                       (260,000)                                (30,000)

Other Assets                                                                                     613,775                    73,400

                Total Assets                                                                  $1,652,400              $399,000

 

Liabilities and Equity

Intercompany Accounts Payable                                                                                                                    $100                 

Bonds Payable                                                                               $600,000                   85,000

Other Liabilities                                                                                 376,340                 115,900

Common Stock, $100 par                                                              360,000                 125,000

Excess Paid In Capital                                                                       49,000                                   12,000

Retained Earnings                                                                           267,060                    61,000

Total Liabilities and Equity                                                      $1,652,400              $399,000

Additional Information:

  1.  During 2015 Power sold to Snyder inventory for $50,000 that had cost Power $40,000.  Snyder held $20,000 of this purchase in inventory at the end of the year.
  2. During 2015 Snyder sold to Power inventory for $100,000 that had cost Snyder $80,000.  Power held $25,000 of this purchase in inventory at the end of the year.
  3. On December 1, 2015, Power had sold to Snyder for $12,000 equipment having a carrying amount of $14,000 on that date.  Snyder established a five-year remaining economic life, no residual value, and the straight-line method of depreciation for the equipment.  Snyder includes depreciation expense in operating expenses.
  4. Goodwill was unimpaired as of December 31, 2015.

Required:

1. Prepare the journal entries for Power to acquire the ownership in Snyder and prepare the entries made by Power under the simple equity method. Prove that the ending amounts for the investment account and the income of subsidiary account are correct as shown in the financial statements.

2. Prepare a working paper for a consolidated income statement, statement of retained earnings, for the year ending December 31, 2015 and a consolidated balance sheet as of December 31, 2015.

You will need to convert the financial statements given into trial balances for the worksheet - meaning that the beginning retained earnings should be shown on the trial balance together with all asset, liability, equity, revenue, expense, and dividend accounts - as though the books had not been closed.

Reference no: EM13720973

Questions Cloud

Define disadvantage of a typical erp system : The Enterprise Resource Planning (ERP) system is a complex computer based information system that is used to integrate most of the typical business operations. While benefits from implementing such a system can be significant, there are disadvanta..
Calculate the size and trends of the market demonstrating : Calculate the size and trends of the market demonstrating the understanding of market issues including external and internal environmental factors
Creation and maintenance of an ethical workplace : Explain in your own words why the creation and maintenance of an ethical workplace is a challenge for business and HR specifically?
Description of the information system structure : Develop a 525- to 700-word summary that includes each of the following items: A description of the information system structure that was selected.
Prepare the journal entries for power : Prepare the journal entries for Power to acquire the ownership in Snyder and prepare the entries made by Power under the simple equity method.
Find the threshold frequency and work function : In an experiment to measure Planck's constant, a metal target is illuminated with ultraviolet light. Using the experimental value of h, find the threshold frequency and work function for this metal
Encourage a culture of creativity : Question 1: What can a company do to encourage a culture of creativity? Question 2: What can companies do to insure successful implementation?
How did presidential addresses and supreme court rulings : Conduct an Internet search to answer the question: How did Presidential addresses and Supreme Court rulings begin to change the lives of the American people beginning in the mid-20th century?
What can be concluded from the signal : A geologist is using a sensor to record waves in a layer of rock and is viewing them on a monitor screen. what can be concluded from the signal about the waves when they reach the sensor

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd