Problem 1:
On january 1, 2016 clinton company purchased 100 of the 1000 shares of sanders company for $4000. At this time the book value of sanders company was $40,000. In 2016 sanders company reported income of $3,000 and paid no dividends. On 12/31/2016 sanders' company stock was selling for $44 per share. At this time clinton does not have influence over sanders.
On january 2, 2017 clinton purchased another 150 shares of sanders company for $6750. With this purchase, clinton now sits on the board of sanders company. During 2017, sanders reported income of $5000 and paid a $3000 in dividends. On 12/31/2017 sanders' stock was selling for $46 per share.
In 2018 sanders company reported a loss of $1000 and paid a $2000 dividend. On 12/31/2018 sanders' stock was selling for $38 per share.
On january 10th 2019 clinton company sold 200 of its shares in sanders' company at $41 per share. After this sale, clinton was removed from the board of sanders company and clinton no longer has influence over sanders company. In 2019 sanders reported income of $6000 and paid $1000 in dividends. On 12/31/2019 the market price of sanders stock was $39.
On january 14th 2020 clinton sold its remain sanders stock at $40 per share.
Required: make all the necessary journal entries for clinton with respect to its investment in sanders from 2016 to 2020....don't forget the original purchase of sanders stock on 1/1/2016
Problem 2:
Gaga and bieber companies have the following balance sheets on january 1, 2016
|
|
Gaga
|
Bieber
|
|
Cash
|
10,000,000
|
500,000
|
|
A/r
|
5,000,000
|
200,000
|
|
Equipment
|
10,000,000
|
1,000,000
|
|
A/d equipment
|
1,000,000
|
100,000
|
|
Land
|
1,000,000
|
200,000
|
|
Total assets
|
25,000,000
|
1,800,000
|
|
Note payable
|
5,000,000
|
800,000
|
|
Common stock
|
10,000,000
|
600,000
|
|
Retained earnings
|
10,000,000
|
400,000
|
On january 2nd gaga acquired all of the outstanding stock of bieber company from bieber's stockholders by issuing 500,000 shares of gaga stock when gaga had a market value of $5 per share. On january 2nd the fair market value of bieber's equipment was $1,100,000 and the fair market value of bieber's land was $50,000. Bieber will continue to exist after this acquisition.
Required:
Make the journal entry gaga makes when it acquires all of the stock of bieber by issuing its 500,000 shares
Make the journal entry bieber makes when its stockholders sell their stock to gaga for gaga stock
Prepare a consolidated balance sheet on january 3rd
Prepare any necessary worksheet entries needed to construct the consolidated balance sheet
Problem 3: (a continuation of problem 2)
At the end of 2016 gaga and bieber had the following financial statements:
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Income Statement
|
|
|
|
|
gaga
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bieber
|
|
Sales
|
3,000,000
|
200,000
|
|
Salary expense
|
400,000
|
50,000
|
|
Depreciation exp
|
1000000
|
100,000
|
|
Investment inc.
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A
|
0
|
|
Income
|
b
|
50000
|
|
Balance Sheet
|
|
|
|
|
gaga
|
bieber
|
|
Cash
|
11,000,000
|
630,000
|
|
A/r
|
5,000,000
|
200,000
|
|
Equipment
|
10,000,000
|
1,000,000
|
|
A/d equipment
|
2,000,000
|
200,000
|
|
Land
|
1,000,000
|
200,000
|
|
Investment in bieber
|
c
|
0
|
|
Total assets
|
d
|
1,830,000
|
|
Note payable
|
5,000,000
|
800,000
|
|
Common stock
|
12,500,000
|
600,000
|
|
Retained earnings
|
e
|
430,000
|
The equipment for both bieber and gaga are depreciated using straight line with a 10 year life (from date of purchase) with no salvage value
Hint: don't forget dividends, and remember gaga only owns 80% of bieber.
Required: A) fill in the missing values a to e on gaga's financial statements...you can use any method you choose (initial value, partial equity or full equity) but you must let me know which method you are using
B) make the journal entries gaga made in 2016 (after acquisition) due to its investment in bieber
C) prepare a consolidated income statement for 2016
D) prepare a consolidated balance sheet for 2016
E) show the worksheet entries needed to prepare the consolidated balance sheet and income statement.
Problem 4
On january 1, 2000 skywalker company purchased all of the outstanding stock of solo company at book value which it accounts for using the initial value method.
In 2016 skywalker company sold inventory to solo company for $1,000,000 cash. This merchandise had cost skywalker $400,000. In 2016 solo had not sold any of that merchandise.
In 2017, solo sold 60% of the merchandise acquired from skywalker for $1,000,000.
In 2018 solo sold the remaining 40% of the merchandise acquired from skywalker for $500,000.
Solo does not pay dividends
Required;
Prepare the journal entry skywalker makes in 2016 when it sells the inventory to solo...skywalker uses perpetual inventory
Prepare the journal entry solo makes in 2016 when it buys the inventory from skywalker...solo also uses perpetual inventory
Prepare the journal entry solo makes in 2017 when it sells the merchandise
Prepare the journal entry solo makes in 2018 when it sells the merchandise
Prepare any worksheet entries needed in 2016 with respect to this inventory transaction
Prepare any worksheet entries needed in 2017 with respect to this inventory transaction
Prepare any worksheet entries needed in 2018 with respect to this inventory transaction
In 2016 skywalker reported unconsolidated income of $4,500,000 while solo reported income of $300,000 what was consolidated income in 2016?
In 2017 skywalker reported unconsolidated income of $5,000,000 and solo reported income of $100,000 what was consolidated income in 2017?
In 2018 skywalker reported unconsolidated income of $3,800,000 and solo reported income of $600,000. What was consolidated income in 2018?
On january 1, 2016 skywalker showed retained earnings of $8,000,000. Skywalker does not pay any dividends. What was skywalker unconsolidated and consolidated retained earnings on: 12/31/16 12/31/17 and 12/31/18?
Problem 5
On january 1, 2002 trump company acquired all of the stock of cruz company at book value. Neither trump nor cruz pay any dividends and trump uses the initial value method for its investment in cruz.
On january 1, 2010 trump company purchased a truck for $400,000. This truck has a 20 year life with no salvage and is being depreciated using straight line depreciation.
On january 1, 2014 cruz company purchased the truck from trump for $350,000 issuing trump a 1 year 10% note with principle and intereset due on january 1 2015. Cruz will depreciate the truck over 16 years using straight line depreciation and zero salvage value.
On january 1, 2015 cruz paid the interest and principle to trump
On january 1, 2018 cruz sold the truck to rubio (an outside company) for $275,000.
Required:
Record the journal entry trump made when he bought the truck
Determine the annual depreciation of the truck to trump company
Make the journal entry trump makes when it sells the truck to cruz
Make the journal entry cruz makes when it buys the truck
Determine the annual depreciation of the truck to cruz company
Make the journal entry cruz makes when it pays off the loan to trump
Make the journal entry cruz makes when it sells the truck to rubio
The unconsolidated incomes of trump and cruz for 2014 to 2018 are as follows:
2014: trump 1,000,000 cruz 200,000
2015 trump 1,100,000 cruz 220,000
2016 trump 1,200,000 cruz 240,000
2017 trump 1,300,000 cruz 260,000
2018 trump 1,400,000 cruz 280,000
Determine consolidated income for each year
On january 1 2014 trump had consolidated retained earnings of $5,000,000 what is trump's unconsolidated and consoliated retained earnings on
12/31/14
12/31/15
12/31/16
12/31/17
12/31/18
Prepare the necessary worksheet entries needed
In 2014
In 2015
In 2018
Problem 6
On january 1 2004 the panther company acquired all of the stock of the bronco company at book value. Neither panther nor bronco companies pay dividends and panther accounts for its ownership of bronco using the initial value method.
On january 1, 2011 panther company issued $1,000,000 10 year 8% bonds for $930,000. Panther uses straight line amortization
On january 1, 2014 bronco company acquired ½ of the panther bonds in the open market paying $521,000 bronco also uses straight line amortization
Required:
Prepare the journal entry panther used when it issued (sold) the bonds in 2011
What is panther's annual interest expense?
Prepare the journal entry bronco used when it bought ½ of the bonds in 2014
What is bronco's annual interest revenue?
Prepare the necessary worksheet entries for 2014 and 2015
In 2014 panther reported unconsolidated income of $800,000 and bronco reported income of $100,000 what was consolidated income in 2014?
In 2015, panther reported unsolidated income of $800,000 and bronco reported income of $100,000 what was consolidated income in 2015?
Using the information from f and g; if panther had retained earnings of $2,300,000 on january 1, 2014 what was their unconsolidated and consolidated retained earnings on 12/31/14 and 12/31/15?
Problem 7
On january 1, 2002 james-bond company purhcased all 1000 of the outstanding shares of spectre company at book value. Information for 2015 is as follows:
James-bond net income $500,000 (unconsolidated) common shares issued and outstanding 200,000 no preferred stock outstanding
Spectre net income $40,000 common shares issued and outstanding 1000 (all owned by james-bond) preferred stock $100 par 6% 100 shares issued and outstanding each convertible into 5 shares of spectre common stock
Required: Determine the eps of james-bond company if the spectre preferred stock is:
Anti-dilutive
Dilutive