Pinot Noir Company obtains 100% of Sangria Company's stock onJanuary 1, 2016. As of...

60.1K

Verified Solution

Question

Accounting

Pinot Noir Company obtains 100% of Sangria Company's stock onJanuary 1, 2016. As of that date, Sangria has the following trialbalance:
                                                                                                         Debit          Credit
Accountspayable                                                                                               $50,000
Accountsreceivable                                                                         $40,000
Additionalpaid-in-capital                                                                                    $50,000
Buildings(4-year remaininglife)                                                      $120,000
Cash and short-terminvestment                                                     $60,000
Commonstock                                                                                                 $250,000
Equipment (5 year remaininglife)                                                  $200,000
Inventory                                                                                          $90,000
Land                                                                                                 $80,000
Long term liabilities (mature12/31/19)                                                               $150,000
Retained earnings,1/1/16                                                                                  $100,000
Supplies                                                                                            $10,000
     Totals                                                                                        $600,000      $600,000
During 2016, Sangria reported net income of $80,000 whiledeclaring and paying dividends of $10,000. During 2017, Sangriareported net income of $110,000 while declaring and payingdividends of $30,000
Assume that Pinot Noir company acquires Sangria's common stockfor $490,000 in cash. As of January 1,2016, Sangria's land had afair value of $90,000, its building were valued at $200,000, andits equipment was appraised at $180,000. Pinot Noir uses the equitymethod for this investment.
Required:
Prepare consolidation worksheet entries for December 31,2016 and Dec 31,2017.

Answer & Explanation Solved by verified expert

4.3 Ratings (697 Votes)

Equity mehod is accounting for consolidation is like a accounting for investment In this method acquirer open a investment account in its books for accounting and adjust the value of investment in associates in a manner to approach to determine the value of investment on a See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

In: AccountingPinot Noir Company obtains 100% of Sangria Company's stock onJanuary 1, 2016. As of that...Pinot Noir Company obtains 100% of Sangria Company's stock onJanuary 1, 2016. As of that date, Sangria has the following trialbalance: Debit CreditAccountspayable $50,000Accountsreceivable $40,000Additionalpaid-in-capital $50,000Buildings(4-year remaininglife) $120,000Cash and short-terminvestment $60,000Commonstock $250,000Equipment (5 year remaininglife) $200,000Inventory $90,000Land $80,000Long term liabilities (mature12/31/19) $150,000Retained earnings,1/1/16 $100,000Supplies $10,000 Totals $600,000 $600,000During 2016, Sangria reported net income of $80,000 whiledeclaring and paying dividends of $10,000. During 2017, Sangriareported net income of $110,000 while declaring and payingdividends of $30,000Assume that Pinot Noir company acquires Sangria's common stockfor $490,000 in cash. As of January 1,2016, Sangria's land had afair value of $90,000, its building were valued at $200,000, andits equipment was appraised at $180,000. Pinot Noir uses the equitymethod for this investment.Required:Prepare consolidation worksheet entries for December 31,2016 and Dec 31,2017.