On January 1, 2016 Obama and Biden Companies had the following balance sheets: O
ID: 2532769 • Letter: O
Question
On January 1, 2016 Obama and Biden Companies had the following balance sheets:
Obama Biden Journal Worksheet Consolidated cash 1,000,000 20,000 1,020,000 land 1,000,000 50,000 1,050,000 equipment 2,000,000 100,000 2,100,000 a/d equipment 1,000,000 50,000 1,050,000 building 2,000,000 100,000 2,100,000 a/d building 1,000,000 50,000 1,050,000 Investment 0 Good will 0 total assets 4,000,000 170,000 4,170,000 accounts payable 1,000,000 20,000 1,020,000 common stock 1,000,000 5,000 1,005,000 apic common stock 1,000,000 45,000 1,045,000 retained earnings 1,000,000 100,000 1,100,000 On January 2nd Obama purchased 60% of Biden for $190,000. The fair market value of Biden's land is $60,000; the fair market value of the equipment is $10,000 and the fair market value of the building is $40,000. The equipment has a 5 year remaining live (no salvage) and the builidng has a 10 year remaining life (no salvage) REQUIRED: A) MAKE THE JOURNAL ENTRY OBAMA MAKES WHEN IT ACQUIRES BIDEN B) MAKE THE WORKSHEET ENTRIES NEEDED TO PREPARE THE CONSOLIDATED BALANCE SHEET C) PREPARE A CONSOLIDATED BALANCE SHEET ON JANUARY 2ND…DON'T FORGET ABOUT OBAMA'S PAYMENT THIS IS A CONTINUATION OF PURCHASE PROBLEM IN 2016 OBAMA AND BIDEN REPORTED THE FOLLOWING FINANCIAL STATEMENTS OBAMA BIDEN SALES 900,000 80,000 DEPRECIATION EQUIP 200000 10000 DEPRECIATION BLDG 100000 5000 INVESTMENT INCOME A 0 INCOME B 65,000 Obama Biden cash 2,065,000 65,000 land 1,000,000 50,000 equipment 2,000,000 100,000 a/d equipment 1,200,000 60,000 building 2,000,000 100,000 a/d building 1,100,000 55,000 INVESTMENT C total assets 4,765,000 200,000 accounts payable 1,000,000 20,000 common stock 1,000,000 5,000 apic common stock 1,000,000 45,000 retained earnings D 130,000 and the fair market value of the building is $40,000. The equipment has a 5 year remaining live (no salvage) and the builidng has a 10 year remaining life (no salvage) REQUIRED; USING WHICHEVER METHOD YOU LIKE (INITIAL VALUE, PARTIAL EQUITY OR FULL EQUITY) MAKE THE JOURNAL ENTRIES OBAMA DOES IN 2016 DUE TO ITS INVESTMENT IN BIDEN (YOU CAN IGNORE THE PURCHASE; JUST THOSE AFTER JANUARY 5TH) PREPARE THE WORKSHEET ENTRIES NEEDED DECEMBER 31 PREPARE A CONSOLIDATED INCOME STATEMENT FOR 2016 PREPARE A CONSOLATED BALANCE SHEET FOR DECEMBER 31 2016.Explanation / Answer
A) Journal entry in the individual books of Obama 2-Jan-16 Investment in Biden A/c 190,000 To cash (190,000) Being 60% stake purchased in Biden B) WORKSHEET ENTRIES NEEDED TO PREPARE THE CONSOLIDATED BALANCE SHEET Net asset of Biden Total assets 170,000 Account payable (20,000) Net assets 150,000 Increase in fair value of land (60000-50000) 10,000 Decrease in fair value of equipment (50000-10000) (40,000) Decrease in fair value of building (50000-40000) (10,000) Adjusted net asset 110,000 Value of 60% stake 66,000 Investment in Biden 190,000 Goodwill 124,000 Minority balance 44,000 C) CONSOLIDATED BALANCE SHEET ON JANUARY 2ND Obama Biden Adjustment Consolidated cash (note 1) 810,000 20,000 830,000 land 1,000,000 50,000 10,000 1,060,000 equipment 2,000,000 100,000 (40,000) 2,060,000 a/d equipment 1,000,000 50,000 1,050,000 building 2,000,000 100,000 (10,000) 2,090,000 a/d building 1,000,000 50,000 1,050,000 Investment (note 1) 190,000 (190,000) 0 Good will 124,000 124,000 total assets 4,000,000 170,000 (106,000) 4,064,000 accounts payable 1,000,000 20,000 1,020,000 Minority interest 44,000 44000 common stock 1,000,000 5,000 (5,000) 1,000,000 apic common stock 1,000,000 45,000 (45,000) 1,000,000 retained earnings 1,000,000 100,000 (100,000) 1,000,000 Total 4,000,000 170,000 -106,000 4,064,000 Note 1: cash has been adjusted to reflect investment in Biden
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