home / study / questions and answers / math / calculus / james company acquired

Question

home / study / questions and answers / math / calculus / james company acquired 80% interest in jones company ...

Question

James Company acquired 80% interest in Jones company at thebeginning of year 1 for $161,000. the book value of the stockpurchased was $140,000. in negotiating the purchase price, it wasagreed the market value was justified in exceeding the book valuebecause of the strong foothold in the market established by a newlylaunched product, instant coffee. competitive brands are now comingon the market, however, and managemetn believese that the initialadvantage gained by jones new product will be dissipated in thenext five years. any goodwill should be amortized over thiperiod.
During year 1, James sold to Jones merchandise for $85,000 thatcost $10,000 and 20% of these goods are still in Jones endinginventory.
James uses the cost method to account for its investment in Jones.Minority interest will reflect the legal method.
a) prepare consolidating work sheet and provide notes to explainentries
b) prepare a statement of consolidated net income showing minority.

Explanation / Answer

32000

Investment in Jones Co Dr 140000 Goodwill Dr 21000 To Bank 161000 P&L Dr 4200 To Goodwill 4200 (Goodwill written off) P&L Dr 15000 To Inventory 15000 (Elimination of profit from closing stock) Common Stock of Jones Dr 140000 To Investment in Jones 140000 Common Stock of Jones Dr 35000 To P&L 3000 To Minority Interest

32000

Consolidated WorkSheet Goodwill 16800 Minority Interest 32000 Inventory 2000 Consolidated Net Income Goodwill written off 4200 Sales 85000 Closing Stock 2000 Share of Minority Interest 3000

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.