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Illustration 3.

5
Paseo Corporation acquired 82% common stock = $328,000.00
Steppe stock holder equity;
-

Common stock
= $50,000.00
Additional paid in Capital = 75,000.00
Retained Earning
= 135,000.00

Total stock holder equity

= 260,000.00

The difference between the carrying amount and net identifiable asset of Steppe
Carrying Amount
Land
Building /EL 10yrs /
Patent/EL 8yrs/
Total

$100,000.00
200,000.00
60,000.00
360,000.00

CFVs
$120,000.00
250,000.00
80,000.00

Difference
$20,000.00
50,000.00
20,000.00

450,000.00

90,000.00

 Determination of Goodwill:
Cost of Paseo Corporation 82% interest in Steppe______________________ $328,000.00
Less: CFVs of Steppe corporation Identifiable net Asset(260,000+90,000)82% 287,000.00
Amount of Goodwill_______________________________________________$41,000.00
 During March 31,2000 declared NI of 1.2/share X 25,000.00 = $30,000.00
1. Parent Company Under the equity method records the following Journal Entries:
Investment in steppe Co. common Stock_____________________________$328,000.00
Cash__________________________________________________________328,000.00
March 31, 2000

Inve. In steppe Co common stock /30,000X 0.82/_____24,600.00
Investment income_______________________________24,600.00

/To record 82% of NI Steppe company for one year ended March31,2000/

Steppe_________________________________________________ 5.150.00 Investment in steppe co.000.000 X .To amortize the difference between CFVs and carrying amount of stepp Company in Identifiable asset on December 1999 as follows: Building/50.500.000/8yrs/_________________ 2.450.000.000.000.00 Land_______________________________________________________20.00 Subsidiary Income ________________________6. 2000 Common Stock____________________________________________50.Steppe_______________________________________________17.00 Building 45.00 . (7.450.500.150. C/stock________________6.00 Goodwil-Steppe_____________________________________________41.500. 5000 X 0.00 Operating Expense-Steppe_______________________________________2.00 Minority Interest/350.000.82) _____________________$ 6.000.000.00 Paseo Corporation and subsidiary Working paper Elimination March 31._________________________________346.00 Patent /20.000.00 Intercom any Investment Income________________________________18.00 CGS.18/__________________________63.000 /10yrs/________________5.00 Total_______________________________$7.00 Retained Earning ____________________________________________135.00 Amortization for 2000.500.000.150.00 Investment in Steppe co.00 Patent.00 Additional Paid in Excess of Capital____________________________75.

050.500.00 NI for the year 2000 as follow NI of subsidiary_____________________________$30.00) Minority interest share___________________________22.050.00 Times___________________________________________0.00 Less: Net reduction elimination /5000+2500/________(7.18 4.050.00 Minority interest /350.00 .Minority Interest NI of Subsidiary company_______________________4.500.000 X 0.000.18/_______________________________4.

28.00 Inter company income________________________51.000.000 X 0.00 /To record dividend receipt form shallow/ Jan.00 Inter company interest Income____________________102.00 Inter company Dividend payable______________51.00 /To record dividend declared by Subsidiary on Jan.00 Investment in Sallow co/ c/stock_____________________51.2000 Inter company Dividend Receivable_____________________51.000.2000 Cash_______________________51.2001 Investment in shallow Co/120.000.31.Illustration 3.2000/ Palid Corporation has the following journal entries Under the equity method record the following Journal Entries: Jan.000.000.31.000.31.000.000. 2000 Dividend declared______________________60.000.00 /To record Net income declared form subsidiary / .28.000.85/___________102.200 Dividend Payable _________________9.000X.00 /To record dividend declaration by subsidiary/ Feb.00 Inter company Dividend payable_____51.000.6 Sallow Company the following Journal Entries Jan.15/______________9.00 Dividend payable/60.00 Cash____________________________________60.28.2000/ Feb.000.00 /To record the payment of dividend on Feb.

00 Plant Asset___________________________________________45.250.00 Cost of good sold______________________________________15.00 Minority Interest/ 30.000.000.000.Palid Corporation and subsidiary Work paper Elimination January 31.00 Investment in shallow company_____________________________218. 2000 Common Stock ______________________________________50.15)_________________________21.00 Operating Expenses_____________________________________1.000.00 Retained earning______________________________________90.000.000-12.000.00 Goodwill_____________________________________________20.000-(60.00 Inter Company investment/102.00 .000X.250.000.750/_________________89.

000.30.1.000.00 CFVs of sisler identifiable asset Oct.000X.00 Determination of goodwill: Cost of Sisler Company at 75% acquired C/stock____________$547.00 Additional paid in excess of capital__________________100.000.75)_______________ 487. 2000/ .000.30.00 The Sisler Company identifiable asset and the CFV of asset of combination Stockholder equity: Common stock$10par_____________________________$250.000. Sisler Journal Entries Sep.000X.00 Plant asset_________________________________50.500.00 Goodwill____________________________________________$60.Assignment 3 Pavich Corporation acquired 75% Sisller company = $547.000.500.00 Total Stockholder equity_________________________ $550.000.00 Inter company dividend______________________7. 1999 Inventory_________________________________$30.000.00 /To record dividend payable by subsidiary Sep.25/________________2.00 The total net identifiable asset of sisler company $650.000.000.00 Dividend payable/10.00 Cost Price = $547.000.2000 Dividend declared____________________10.00 A.500.00 Patent(EL 5yrs)_____________________________ 20.00 Less: sisler identifiable net asset/650.500.00 Total Difference______________________________100.000.500.00 Retained Earning____________________________ 200.

250.30.000. 2001 Investment in sisler Co/0. 1999 Investment in Sisler Co.00 / To record declared NI by Subsidiary/ Sep.00 Inter company dividend______________________56. 2001/  Pavich Corporation prepare the following journal Entries Oct.00 Inter company investment income_____________________90.75___29.000.00 Cash_____________________________________________547.000/________________90.000.00 /To record dividend received from Sisler company/ Sep.00 Dividend payable/75.30.00 Investment in Sisler co__________________________29250.250.750.00 / To record dividend received company investment income/ .30.000.000 x 0.2001 Investment in Sisler company/120.00 Inter company investment income____________________60.250.000X.75/ _____________90.000+5000+4000/ x .____________________________547.00 Investment in Sisler company___________________56.00 Sept.30. 2000 Investment in Sisler Company. 2001 Inter company investment income/30.000.25/________________18.00 Inter company investment income_____________________90.000.30.Sep.500.2001 Cash_______________________________56.01.2001 Dividend declared____________________75.00 /To record amortization difference b/n CFVs and Carrying amount sisler company asset/ Sep.30.000.250.________________________60.00 /To record dividend payable by subsidiary Sep.00 /To record 75% of NI pavich corporation/ Sep.75X120.000.30.

000/x0.750.00 Plant Asset –Sisler/50000-5000/________________________________45.000.750.Sep.00 //To record amortization difference b/n CFVs and Carrying amount sisler company asset/ Pavich Corporation and subsidiary Working Paper elimination Sep.00 Goodwill-Pavich_____________________________________________60.30.750.00 .000.00 Investment in sisler company C/stock___________________6.00 Retained Earning-Sisler_____________________________________200.000.00 Minority interest in net asset of subsidiary (650.75_________6.00 Additional paid Capital Sisler________________________________100.25)-(10.000.00 Operating Expense_____________________________________________4.00 Investment in Sisler Co.000X0.00 Inter Company investment income pavich/60.000.250.000.000X 0.000.00 Minority interest net income/80.000-39.250.00 Minority interest in net asset of subsidiary________________________10.000-29500/___________30. C/stock Pavich_____________________570. 2000 Common Stock Sisler______________________________________250.750 Dividend declared______________________________________10.25__________________10.30 2001 Inter company investment income/5000+4000/ X 0.000.00 Cost Good sold_______________________________________________35.000.25) _______________________160.

00 Goodwill-Pavich_____________________________________________60.500.000-6750/_____________83. 2001 Common Stock Sisler______________________________________250.750.25____________________________________ 27. C/stock Pavich/570.000-4000/________________________________12.00 Patent (net).00 Additional paid Capital Sisler________________________________100.250) -75.000+23.00 Retained Earning/200.750.000.000.000.000-9000) X0.000.750 Dividend declared-Sisler____________________________________75.250)______________246.750.00 Plant Asset –Sisler/45..00 Cost Good sold-Sisler_________________________________________5.Pavich (30.250.000 + 10.000 X 0.000.750-56.250+90.00 \To establish Minority interest in subsidiary net income for year 2001/ .Sisler/16.750-7500)________________23.00 Minority interest in net asset of subsidiary (160.00 Minority interest Net asset of Subsidary_________________________27.30.00 Minority interest NI of Subsidiary (120.000.000+80.00 Investment in Sisler Co.000-5000/________________________________40.000.00 Retained Earning Subsidiary.00 Operating Expense_____________________________________________4.000/____570.000.000)-(10.250.00 Inter Company investment income pavich/90.Pavich Corporation and subsidiary Working Paper elimination Sep.25______________________151.

Illustration 3. 2001 Investment in sage company _________99.12 to stock holder of record Dec. 2001.750.7 Sage prepares the following journal entries for the declaration and payment of the NOV.2001 Intercompany dividend Receivable Invest in sage common stock 47.1.500 Inter com Dividend payable 47.2001./ Cash____________47.2001.000 Dividend payable 2500 Inter company DP 47.750 To record 95% of net income of Sag Company for the year ended Dec 31.2001) Dec.500 47.00 (105.500 (To record declaration of dividend payable Dc.000 * 95%) Inter company investment income 99. 2001 dividend declared 50.000 /To record payment of dividend declared Nov22. 12 Dividend payable 2. 22.000 (To record receipt of dividend from sage company) Dec31.000 Inter dividend Receivable 47.) .500 Cash 50.1. Nov22 .500 /To record dividend declared by sag comp pay Dec17./ Post`s journal entries for 2001 under the equity method of accounting include the following. 2001 to stock holder of record Dec.2001 to stock holder of record Dc 1.

00 335.000.050.00 .00 Post Corporation investment in sage co 1.00 20.250.000.230.000 – 5000) Good will (net) sage Cost of goods sold sage Operating expense sage 400. 2001 Common stock sage Additional pic sage Retained earnings sage Intercompany income post Plant asset net sage (176.00 2000.Post Corporation and subsidiary Working paper elimination Dec 31.00 17.00 Minority interest net asset of Sage_______61.000.00 Dividend declared___________________50.00 34.000.00 334.00 37.000.200.000.000.00 162.250.000 – 14.000) Lease hold (net) sage (25.