Using the Option 1 spreadsheet (linked at the bottom of this page), review the j

Question

Using the Option 1 spreadsheet (linked at the bottom of this page), review the journal entries, Peerless (P) company entries for 20x7, and the book value calculation for Peerless Company.

Required information:
1). Required entry for investment equity using case
2a). Record of parent 100% share of subsidiary 20x7 income
2b). Record of parent 100% share of subsidiary’s 20x7 dividend
3). Book value calculation for Investment value on December 30, 20x7

Follow instructions from the worksheet carefully. Use formulas to enter amounts and data. Show details of your calculations and processes. Explain each journal entry or why one was omitted. Do not hard code numbers in the Excel Worksheet.

Peerless Products (parent company) purchased on January 02, 20x7, Special Foods (subsidiary) for $300,000. Information for acquisition entry for January 02, 20x7. Peerless Products Fair Value Consideration: $300,000 Special Foods book value of equity: Common stock $100,000 Paid in capital 50,000 Retained earnings 150,000 1). Required entry for investment equity using cash 1/2/20x7 Debit $xxxx Credit $xxxx 2). Information to complete the parent company January to December 20x7 entries Parent Subsidiary    Common stock, January 02, 20x7 $600,000 $100,000    Paid in capital 100,000 50,000 Retained earnings 300,000 150,000 Separate operating income - parent 200,000 Net income - subsidiary 100,000 Dividends 100,000 50,000 2A). Parent company entry for the year    Debit $xxxx Credit $xxxx Record of parent 100% share of subsidiary 20x7 income 2B) Parent company entry of the year Debit $xxx Credit $XXX Record parent 100% share of subsidiaries 20x7 dividend 3). Book value calculation for investment value on December 30, 20x7 Total investments equals Common stock Paid In capital Retained earnings Original book value $xxx $xxx $xxx $xxx Net income XXX XXX Less dividends XXX XXX Ending book value XXX XXX XXX XXX

Explanation / Answer

1 Required entry for investment equity using cash 01-02-17 Investment in Special Food Debit $300,000 To Cash Credit $300,000 2 (a) Record of parent 100% share of subsidiary 20x7 income Investment in Special Food Debit $50,000 Profit from Subsidiary Credit $50,000 2 (b) Record of parent 100% share of subsidiary’s 20x7 dividend Bank A/c Debit $50,000 Divident Income Credit $50,000 3 Book value calculation for Investment value on December 30, 20x7 Total investments equals Common stock Paid In capital Retained earnings Original book value $1,000,000 $600,000 $100,000 $300,000 Net income $200,000 200000 Less dividends $100,000 100000 Ending book value $1,100,000 $600,000 $100,000 $400,000

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