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problem 8-6 (LO 4) Worksheet, direct and indirect holding, interco.docx
- 1. problem 8-6 (LO4) Worksheet, direct and indirect holding, intercompany mer- chandise, machine. The following diagram depicts the relationships among Mary Company, John Company, and Joan Company on December 31, 2014: Mary John Owns 60% Owns 40% Joan
- 2. Owns 50% Mary Companypurchases its interest in John Company on January 1, 2012, for $204,000. John Company purchases its interest in Joan Company on January 1, 2013, for $75,000. Mary Company purchases its interest in Joan Company on January 1, 2014, for $72,000. All invest- ments are accounted for under the equity method. Control over Joan Company does not occur until the January 1, 2014, acquisition. Thus, a D&D schedule will be prepared for the invest- ment in Joan as of January 1, 2014. The following stockholders’ equities are available: John Joan Company December31 ,
- 3. December 31 2011 2012 2013 Commonstock ($10par)............ ............ $150,000 Commonstock ($10par). ........... ............ $100,000 $100,000 Paid-incapitalinexcess of par ............. ..... 75,000 Retained earnings ............................. 75,000 50,000 80,000
- 4. Totalequity ......... ....................... $300,000 $150,000 $180,000 On January 2, 2014, Joan Company sells a machine to Mary Company for $20,000. The machine has a book value of $10,000, with an estimated life of five years and is being depre- ciated on a straight-line basis. John Company sells $20,000 of merchandise to Joan Company during 2014 to realize a gross profit of 30%. Of this merchandise, $5,000 remains in Joan Company’s December 31, 2014, inventory. Joan owes John $3,000 on December 31, 2014, for merchandise delivered during 2014. Trial balances of the three companies prepared from general ledger account balances on December 31, 2014, are as follows:
- 5. Mary John Joan Cash ...................... ................. 62,500 60,000 30,000 Accounts Receivable ........................... 200,000 55,000
- 6. 30,000 Inventory ................... ................. 360,000 80,000 50,000 Investmentin JohnCompany........... ........ 270,000 Investmentin JoanCompany........... .......... 86,000 107,500 Property, Plant,andEquipment.... ........... ...2,250,000 850,000 350,000 Accumulated Depreciation ....... ........... .... (938,000) (377,500) (121,800
- 7. Mary John Joan Intangibles.... ........... .................... 15,000 Accounts Payable ............... ........... ... (215,500) (61,000) (22,000) AccruedExpenses............... ........... ... (12,000) (4,000) (1,200) BondsPayable. ........... ........... ......... (500,000)
- 8. (300,000) (100,000) Common Stock($5par) ........................ (500,000) CommonStock($10par) ....................... (150,000) Common Stock($10par) ....................... (100,000) Paid-In Capital inExcessof Par ...... ........... (700,000) (75,000) RetainedEarnings, January1, 2014........ . (290,000) (130,000) (80,000) Sales .. ........... .......................... (1,800,000) (500,000) (300,000) Gainon SaleofEquipment ......... ........... ..
- 9. (10,000) SubsidiaryIncome............... ........... ... (58,000) (20,000) CostofGoodsSold .............. ........... ... 1,170,000 350,000 180,000 OtherExpenses ................. ........... ... 525,000 100,000 90,000 Dividends Declared.............. ........... ... 75,000
- 10. 15,000 5,000 Totals ........... .......................... 0 0 0 Preparethe worksheet necessary to produce the consolidated financial statements of Mary Company and its subsidiaries as of December 31, 2014. Include the determination and distri- bution of excess and income distribution schedules. Any excess of cost is assumed to be attribu- table to goodwill.