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a1milizEXERCISE 3-14 Equity method journal entries, 75 percent ownership, purchase differentials, negative goodwill, worksheet eliminations with separate accumulated depreciation account, consolidation worksheet
I only need the consolidation worksheet for my part.
| Crane Mechanics acquired 75 percent of Downey Enterprises on March 31, 2005, for $3,645,000. Downey's book value at that date totaled $4,000,000. Appraisal values were greater than book values for identifiable assets in the following amounts: Inventory ($300,000) and Plant and Equipment ($700,000). The purchase differential for Inventory is to be amortized over five months and Plant and Equipment over ten years. For the remainder of 2005 Downey reports $635,000 of income and pays $100,000 in dividends. The following balances exist for Crane at December 31,2005, and Downey at March 31 and December 31, 2005. | ||||||||
| Crain | Downey | |||||||
| 31-Dec | 31-Mar | 31-Dec | ||||||
| Cash | $ 730,000 | $ 175,000 | $ 180,000 | |||||
| Inventory | $ 1,950,000 | $ 260,000 | $ 340,000 | |||||
| Plant and Equipment | $ 17,650,000 | $ 5,150,000 | $ 5,765,000 | |||||
| Accumulated Depreciation | $ (4,655,000) | $ (935,000) | $ (1,250,000) | |||||
| Investment in Downey | $ 3,886,875 | |||||||
| Expenses | $ 6,400,000 | $ 1,000,000 | $ 4,265,000 | |||||
| Dividends | $ 1,275,000 | $ 150,000 | $ 250,000 | |||||
| Total Debits | $ 27,236,875 | $ 5,800,000 | $ 9,550,000 | |||||
| Liabilities | $ 3,550,000 | $ 650,000 | $ 500,000 | |||||
| Common Stock | $ 350,000 | $ 100,000 | $ 100,000 | |||||
| Additional Paid-In Capital | $ 2,650,000 | $ 850,000 | $ 850,000 | |||||
| Retained Earnings | $ 9,720,000 | $ 2,800,000 | $ 2,800,000 | |||||
| Sales | $ 10,650,000 | $ 1,400,000 | $ 5,300,000 | |||||
| Extraordinary Gain From | ||||||||
| Acquisition of Downey | $ 105,000 | |||||||
| Investment Income | $ 211,875 | |||||||
| Total Credits | $ 27,236,875 | $ 5,800,000 | $ 9,550,000 | |||||
| A. Record the journal entries necessary on Crain's books for 2005 assuming that Crain uses the equity method to account for its investment in Downey. | ||||||||
| B. Prepare all worksheet eliminations in journal entry form necessary to consolidate Crain and Downey at December 31, 2005 | ||||||||
| C. Prepare the Consolidation worksheet for Crain and Downey at December 31,2005. | ||||||||
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