50.1K

Verified Solution

Link Copied!

C Company obtains 100 percent of A's Companys stock on January 1, 2025. As of that date, A has the following trial balance:

	Debit			Credit
Accounts payable				$	56,700
Accounts receivable	$	43,800
Additional paid-in capital					50,000
Buildings (net) (4-year remaining life)		143,000
Cash and short-term investments		80,250
Common stock					250,000
Equipment (net) (5-year remaining life)		295,000
Inventory		110,500
Land		112,000
Long-term liabilities (mature 12/31/28)					171,000
Retained earnings, 1/1/25					268,750
Supplies		11,900
Totals	$	796,450		$	796,450

During 2025, A reported net income of $122,500 while declaring and paying dividends of $15,000. During 2026, A reported net income of $159,250 while declaring and paying dividends of $49,000.

Assume that C Company acquired A's common stock by paying $744,750 in cash. All of A's accounts are estimated to have a fair value approximately equal to present book values. C uses the partial equity method to account for its investment.

Prepare the consolidation worksheet entries for December 31, 2025, and December 31, 2026

1. Prepare entry S to eliminate stockholders' equity accounts of subsidiary.

2. Prepare entry A to recognize goodwill portion of the original acquisition fair value.

3. Prepare entry I to eliminate intra-entity income accrual for the current year based on the parent's usage of the partial equity method.

4. Prepare entry D to eliminate intra-entity dividend transfers.

5. Prepare entry E to recognize 2025 amortization expense.

6. Prepare entry *C to convert parent company figures to equity method.

7. Prepare entry S to eliminate stockholders' equity accounts of subsidiary for 2026.

8. Prepare entry A to recognize original goodwill balance.

9. Prepare entry I to eliminate Intra-entity Income accrual for the current year.

10. Prepare entry D to eliminate Intra-entity dividend transfers.

11. Prepare entry E to recognize 2026 amortization expense.

I will give a thumbs up if all 11 are answered

Answer & Explanation Solved by verified expert

See Answer