Paper Company acquired 100 percent of Scissor Company’s outstanding common stock
ID: 2552174 • Letter: P
Question
Paper Company acquired 100 percent of Scissor Company’s outstanding common stock for $370,000 on January 1, 2008, when the book value of Scissor’s net assets was equal to $370,000 including Accumulated Depreciation of $24,000. Problem 1 summarizes the first year of Paper’s ownership of Scissors. Paper uses the equity method to account for investments. Scissor’s net income in 2009 was $107,000 and declared dividends of $30,000. The following trial balance summarizes the financial position and operations for Paper & Scissor as of December 31, 2009.
A. Prepare any normal equity method journal entries related to the investment in Scissor Company during 2009.
B. Prepare the eliminating entries needed as of December 31, 2009, to complete a consolidation worksheet.
C. Update T-Accounts for the investment & Income Accounts & Book Value Calculation:
Information of problem 1 is shown below
Paper Company acquired 100 percent of Scissor Company’s outstanding common stock for $370,000 on January 1, 2008, when the book value of Scissor’s net assets was equal to $370,000 including Accumulated Depreciation of $24,000. Paper uses the equity method to account for investments. During 2008 Scissor Company’s net income was $93,000 and declared dividends of $25,000. Trial balance date for Paper & Scissors as of December 31, 2008, are as follows:
Debit Creft Accounts Receivable Irvestment in Scissor Co $ 515,00a Buildings & Equipment$ 875,000o Cost of Goods Sold Selling & Admin expense$ Dividends Declared Accumulated Depreciation 312,000 le Retaïned Eanings Income from Scissor T5,Explanation / Answer
The dates of the Trial balances in respect of Scissors sees to be wrong.
A. Journal entries
B. Elimination Entries
Investment account as at Dec.31, 2008 Balance as at Jan.1, 2008 370000 Equity income from Scissors for 2008 93000 Total 463000 Dividend received -25000 Investment account as at Dec.31,2008 438000 Investment account as at Dec.31, 2009 Balance as at Jan.1, 2009 438000 Equity income from Scissors for 2009 107000 Total 545000 Dividend received -30000 Investment account as at Dec.31,2009 515000Related Questions
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