#12 On January 1, 20X8, Bond Corporation acquired 80 perce ate of acquisition, t
ID: 2514902 • Letter: #
Question
#12 On January 1, 20X8, Bond Corporation acquired 80 perce ate of acquisition, the book value and fair value of Gale's net assets wru nt of Gale Company's voting stock. O . Bond uses the equity method of accounting for its ownership of Gale, and ines on the consolidaior accumulated depreciation prior to acquisition in its e worksheet limination entries on the consolidation On December 31, 20x8, the trial balances of the two companie s are as follows: Bond Corporation Debit Gale Company Debit Item Credit Credit $127,000 428,000 Current Assets $538,000 950,000 298,400 185,000 550,000 300,000 Depreciable Assets Investment in Gale Co. Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Current Liabilities Long-Term Debt 12,000 62,000 40,000 284,000 250,000 220,000 328,600 750,000 860,000 128,800 $2,821.400 $2,821400 50,000 105,000 27,000 133,000 119,000 235,000 Common Stock Retained Earnings Sales Income from Gale Co nt did Bond Corporation pay for its investment in Gale Company on January 1, 20X8? b) Prepare the elimination entries required to prepare the consolidated financial statements as of December 31, 20X8 lidated financial statements as of December 31, 20X8 for retained earnings. d) Determine the amount reported on the consolidated financial statements as of December 31, 20X8 for depreciable assetsExplanation / Answer
a) Computation of amount of investment in Gale Company:
Investment in Gale company
298,400
Less: net income from gale
(128,800)
Add: Dividend income (40,000*80%)
32,000
Amount paid for initial investment
201,600
b) Elimination entries:
Account title
Common stock
133,000
Retained earnings
119,000
Differential
46,000
Investment in Gale company
298,400
Accumulated depreciation (50,000*80%)
40,000
Depreciable asset
40,000
c) Computation of amount of retained earnings reported on consolidation balance sheet:
Bond corporation
gale company
sales
860,000
235,000
income from gale
128,800
credits
988,800
235,000
depreciation exp
(185,000)
(12,000)
other expenses
(550,000)
(62,000)
income carry forward
253,800
161,000
retained earnings
750,000
119,000
income from above
253,800
161,000
1,003,800
280,000
Dividends declared
(300,000)
(40,000)
retained earnings on dec 31
703,800
240,000
Total retained earnings
943,800
Less: Adjustments
(240,000)
Consolidated retained earnings
703,800
Receipt of 80% of the dividends would simply transfer cash from one company to another.
The dividend would be eliminated in consolidation. However, 20%of the dividend would be paid to the non controlling shareholders and would reduce non controlling interest on the consolidated balance sheet because under the equity method.
d) Computation of amount of Depreciable assets reported on consolidation balance sheet:
Account title
Depreciable Assets of Bond corporation
950,000
Depreciable Assets of Gale company
428,000
Less: Accumulated depreciation elimination entry
(40,000)
Consolidated Depreciable assets
1,252,400
Investment in Gale company
298,400
Less: net income from gale
(128,800)
Add: Dividend income (40,000*80%)
32,000
Amount paid for initial investment
201,600
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.