CONSOLIDATED FINANCIAL STATEMENT AFTER ACQUISITION CHAPTER 4 EXERCISES FALL 2015

E4-1 Page 214 Percy Company purchased 80% of the outstanding voting shares of Song Company at the beginning of 2009 for $387,000. At the time of purchase, Song Company’s total stockholders’ equity amounted to $475,000. Income and dividend distributions for Song Company from 2009 through 2010 are as follows: 2009 2010 2011 Net income (loss) $ 63,500 $ 52,500 $ (55,000) Dividend distribution 25,000 50,000 35,000 Required Prepare journal entries for Percy Company from the date of purchase through 2011 to account for its investment in Song Company under each of the following assumptions: A.Percy Company uses the cost method to record its investment. B.Percy Company uses the partial equity method to record its investment. C.Percy Company uses the complete equity method to record its investment. P4-8 Page 225-226: On January 1, 2010, Parker Company purchased 95% of the outstanding common stock of Sid Company for $160,000. At that time, Sid’s stockholders’ equity consisted of common stock, $120,000; other contributed capital, $10,000; and retained earnings, $23,000. On December 31, 2010, the two companies’ trial balances were as follows at right: Parker Sid Cash $ 62,000 $ 30,000 Accounts receivable 32,000 29,000 Inventory 30,000 16,000 Investment in Sid 160,000 - Plant and equipment 105,000 82,000 Land 29,000 34,000 Dividends declared 20,000 20,000 Cost of goods sold 130,000 40,000 Operating expenses 20,000 14,000 Total debits $ 588,000 $ 265,000 Accounts payable $ 19,000 $ 12,000 Other liabilities 10,000 20,000 Common stock 180,000 120,000 Other contributed capital 60,000 10,000 Retained earnings 40,000 23,000 Sales 260,000 80,000 Dividend income 19,000 - Total credits $ 588,000 $ 265,000 Required A.Prepare a consolidated statements workpaper on Dec. 31, 2010. B.Prepare a consolidated statements workpaper on Dec. 31, 2011, assuming the two companies’ trial balances were as follows