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ACC401 Advanced Accounting

Homework Week 3
Chapter 4
Exercise 4-2
Workpaper entries 12/31/13 Cost Method
Investment in S Co
Retained Earnings 1/1 - P Co
($160,000 $50,000)*.90)

99,000
99,000

Dividend Income
Dividends Declared - S Co

9,000
9,000

Parent
Share
Purchase price and implied value
Less: Book value:
Difference between IV and BV
Allocated to undervalued land
Balance

465,000
450,000
15,000
(15,000)
0

NonControlling
Share
51,667
50,000
1,667
(1,667)
0

Common Stock - S Co
450,000
Retained Earnings 1/1/13 - S Co
160,000
Land
16,667
Investment in S Co ($465,000 + $99,000)
Non-controlling Interest ($51,667 + .10 x ($160,000 $50,000)

Entire
Value
516,667
500,000
16,667
(16,667)
0

564,000
62,667

Exercise 4-7
a

Journal entries
Investment in sales (150,000*.85)
Retained earnings
Cash
Investment in sales (50,000*.85)

161500
161500
42500
42500

Workpaper
Equity Income
Dividends Declared
Investment in Sales

161,500

Common Stock

100,000

42,500
119,000

ACC401 Advanced Accounting


Other Contributed Capital
Retained Earnings 1/1
Difference between IV & BV
Investment in Sales ($350,000 + $83,300)
Non-controlling interest ($61,765 + $14,700)
Goodwill
Difference IV & BV

40,000
238,000
131,765
433,300
76,465
131,765
131,765

Problem 4-1
A Cost Method
2009
Investment in Singer Co.
Cash

4,972,000

Cash ($500,000*.90)
Dividend Income

450,000

Cash ($500,000*.90)
Dividend Income

450,000

Cash ($500,000*.90)
Dividend Income

450,000

Cash ($500,000*.90)
Investment in Singer Co.
Liquidating dividend

450,000

4,972,000

450,000

2010
450,000

2011
450,000

2012
450,000

B Partial Equity Method


2009
Investment in Singer Co.
Cash
Cash ($500,000*.90)
Investment in Singer Co.
Investment in Singer Co.
Equity Income
($1,997,800*.90)

4,972,000
4,972,000
450,000
450,000
1,798,020
1,798,020

2010
Cash ($500,000*.90)
Investment in Singer Co.

450,000

Investment in Singer Co.


Equity Income
($500,000*.90)

428,400

450,000
428,400

ACC401 Advanced Accounting


2011
Cash ($500,000*.90)
Investment in Singer Co.

450,000

Equity Income ($179,600*.90)


Investment in Singer Co.

161,640

Cash ($500,000*.90)
Investment in Singer Co.

450,000

Equity Income ($323,800*.90)


Investment in Singer Co.

291,420

450,000
161,640

2012
450,000
291,420

C Complete Equity Method


Difference between IV & BV
Parent
Share
Purchase price and implied value
Less: Book value:
Difference between IV & BV
Undervalued depreciable assets (15 year life)
Balance

4,972,000
4,961,160
10,840
(10,840)
0

NonEntire
Controlling
Value
Share
552,444 5,524,444
551,240 5,512,400
1,204
12,044
(1,204)
(12,044)
0
0

2009
Investment in Singer Co.
Cash
Cash ($500,000*.90)
Investment in Singer Co.
Investment in Singer Co.
Equity Income ($1,997,800*.90)

4,972,000
4,972,000
450,000
450,000
1,798,020
1,798,020

Equity Income ($10,840/15 years)


Investment in Singer Co.

723

Cash ($500,000*.90)
Investment in Singer Co.

450,000

Investment in Singer Co.


Equity Income ($476,000*.90)

428,400

723

2010

Equity Income ($10,840/15 years)

450,000
428,400
723

ACC401 Advanced Accounting


Investment in Singer Co.

723

2011
Cash ($500,000*.90)
Investment in Singer Co.

450,000

Equity Income ($179,600*.90)


Investment in Singer Co.

161,640

Equity Income ($10,840/15 years)


Investment in Singer Co.

723

Cash ($500,000*.90)
Investment in Singer Co.

450,000

Equity Income ($323,800*.90)


Investment in Singer Co.

291,420

Equity Income ($10,840/15 years)


Investment in Singer Co.

723

450,000
161,640
723

2012
450,000

291,420

723

Problem 4-10 Consolidated statements workpaper


Poco
Solo
Company Company
Income Statement
Sales
Equity in Subsidiary Income
Total Revenue
Cost of Goods Sold
Other Expenses
Total Cost and Expense
Net Income
Noncontrolling Interest
Net Income to Retained Earnings
Retained Earnings Statement
Retained Earnings 1/1
Poco Company
Solo Company
Net Income from above
Dividends Declared
Poco Company
Solo Company
Retained Earnings 12/31

Eliminating Entries
Dr.
Cr.

760,000
164,000
924,000
410,000
100,000
510,000
414,000

410,000

414,000

205,000

164,000

60,000
205,000

60,000
164,000

N-C Interest Consolidated


Balance
1,170,000

164,000
410,000
125,000
80,000
205,000
205,000
41,000
41,000

50,000
414,000

50,000
41,000

(30,000)
434,000

1,170,000
535,000
180,000
715,000
455,000
(41,000)
414,000

414,000
(30,000)

(15,000)
250,000

224,000

12,000
12,000

(3,000)
38,000

434,000

ACC401 Advanced Accounting

Balance Sheet
Cash
Inventory
Investment in Solo
Difference b/w Implied & Book
Value
Land
Goodwill
Total
Accounts Payable
Common Stock:
Poco Company
Solo Company
Other Contributed Capital
Poco Company
Solo Company
Retained Earnings from above
Noncontrolling Interest 1/1
Noncontrolling Interest 12/31

161,500
210,000
402,000

125,000
195,000

286,500
405,000

67,500
75,000

152,000
250,000
67,500

150,000

848,500

470,000

225,000
67,500
984,000

154,500

35,000

189,500

67,500

200,000

200,000
150,000

150,000

434,000

35,000
250,000

35,000
224,000

848,500

470,000

544,000

60,000

60,000
12,000
62,500
544,000

38,000
62,500
100,500

434,000
100,500
984,000