Reference no: EM133234160
South Company acquires a 90% interest in West Company for $585,000 cash on January 1, 20X0, when West Company had the following balance sheet:
Assets Liabilities and Equity
Current assets $ 200,000 Current liabilities $100,000
Depreciable fixed assets (net) 400,000 Common Stock ($10 par) 200,000
Retained earnings 300,000
Total assets $ 600,000 Total liabilities & equity $600,000
The excess of the price paid over book value is attributable to the fixed assets, which have a fair value of $500,000, and to goodwill. The fixed assets have a 10-year remaining life. South Company uses the simple equity method to record its investment in West Company.
For the year ending December 31, 20X0, the following information for West Company is available:
West total net income: $50,000
West total dividends declared: $10,000
For the year ending December 31, 20X1, the following information for West Company is available:
Retained Earnings January 1, 20X1 $340,000
Total Net Income $ 30,000
Total Dividends Declared $ 20,000
Requirements:
- Do the journal entries required on the books of South Company to record West's 20X0 net income and dividends.
- Do a determination and distribution of excess schedule for the investment in West Company.
- Do all elimination and adjustment entries that would be required on the 20X0 consolidated worksheet.
- Do the journal entries required on the books of South Company to record West's 20X1 net income and dividends.
- Do all elimination and adjustment entries that would be required on the 20X1 consolidated worksheet.