week 3
knohe_
3.10.docxProblem 3-10 (LO3, 5) 100%, cost method worksheet, several adjustments, third year.
Refer to the preceding information for Paulcraft’s acquisition of Switzer’s common stock. Assume that Paulcraft pays $480,000 for 100% of Switzer common stock. Paulcraft uses the cost method to account for its investment in Switzer. Paulcraft and Switzer have the following trial balances on December 31, 2017 as shown on page 191.
Paulcraft
Switzer
Cash
100,000
110,000
Accounts Receivable
90,000
55,000
Inventory
120,000
86,000
Land
100,000
60,000
Investment in Switzer
480,000
Buildings
800,000
250,000
Accumulated Depreciation
(220,000)
(80,000)
Equipment
150,000
100,000
Accumulated Depreciation
(90,000)
(72,000)
Current Liabilities
(60,000)
(102,000)
Bonds Payable.
(100,000)
Common Stock
(100,000)
(10,000)
Paid-In Capital in Excess of Par
(900,000)
(90,000)
Retained Earnings, January 1, 2017
(315,000)
(182,000)
Sales
(800,000)
(350,000)
Cost of Goods Sold
450,000
210,000
Depreciation Expense—Buildings
30,000
15,000
Depreciation Expense—Equipment
15,000
14,000
Other Expenses
140,000
68,000
Interest Expense
8,000
Dividend Income
(10,000)
Dividends Declared
20,000
10,000
Totals
0
0
Required
1. Prepare a value analysis and a determination and distribution of excess schedule for the investment in Switzer.
2. Complete a consolidated worksheet for Paulcraft Corporation and its subsidiary Switzer Corporation as of December 31, 2017. Prepare supporting amortization and income distribution schedules.
