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week20320homework20exercises.xlsxExercise 1
| Exercise 1: Consolidation Elimination Entries | ||||||||
| For each of the following scenarios, Assume the companies are related and subject to consolidation and make an appropriate elimination entry by entering the required amounts in the gray shaded cells. When correct, cells will change color. If a cell does not require an entry (aka 0) then type in the word "zero" and the cell will change color if that's correct. | ||||||||
| A) Company P has a note receivable open from Company S in the amount of $50,000. $4,000 interest was incurred and accrued for at year-end | ||||||||
| Account | Debit | Credit | ||||||
| Note Payable | ||||||||
| Interest Income | ||||||||
| Interest Payable | ||||||||
| Note Receivable | ||||||||
| Interest Expense | ||||||||
| Interest Receivable | ||||||||
| B) Company P has a note receivable from Company S open at year-end in the amount of $30,000. $2,000 interest was incurred and paid for by year-end | ||||||||
| Account | Debit | Credit | ||||||
| Note Payable | ||||||||
| Interest Income | ||||||||
| Interest Payable | ||||||||
| Note Receivable | ||||||||
| Interest Expense | ||||||||
| Interest Receivable | ||||||||
| C) Company P hds a note receivable from Company S in the amount of $7,500 that was paid off by year-end. $250 interest was incurred and paid for by year-end | ||||||||
| Account | Debit | Credit | ||||||
| Note Payable | ||||||||
| Interest Income | ||||||||
| Interest Payable | ||||||||
| Note Receivable | ||||||||
| Interest Expense | ||||||||
| Interest Receivable | ||||||||
| D) Company S sold inventory to Company P for $100,000 with a gross margin of 70% on account. All the inventory remains on Company P's books at year-end and it has not been paid for | ||||||||
| Account | Debit | Credit | ||||||
| Sales | ||||||||
| Accounts Payable | ||||||||
| Accounts Receivable | ||||||||
| Cost of Good Sold | ||||||||
| Inventory | ||||||||
| E) Company S sold inventory to Company P for $80,000 with a gross margin of 50% on account. All the inventory remains on Company P's books at year-end and it has not been paid for | ||||||||
| Account | Debit | Credit | ||||||
| Sales | ||||||||
| Accounts Payable | ||||||||
| Accounts Receivable | ||||||||
| Cost of Good Sold | ||||||||
| Inventory | ||||||||
| F) Company P sold inventory to Company S for $50,000 with a gross margin of 40% on account. All the inventory was subsequently sold to 3rd parties, and it has been paid for: | ||||||||
| Account | Debit | Credit | ||||||
| Sales | ||||||||
| Accounts Payable | ||||||||
| Accounts Receivable | ||||||||
| Cost of Good Sold | ||||||||
| Inventory | ||||||||
| G) Company P sold inventory to Company S for $30,000 with a gross margin of 25% on account. All the inventory was subsequently sold to 3rd parties, and it has been paid for: | ||||||||
| Account | Debit | Credit | ||||||
| Sales | ||||||||
| Accounts Payable | ||||||||
| Accounts Receivable | ||||||||
| Cost of Good Sold | ||||||||
| Inventory | ||||||||
| H) Company P sold a fully-depreciated asset with an original cost of $75,000 to Company S for $20,000. Company S recognized $5,000 in depreciation expense on the asset and it has been paid for: | ||||||||
| Account | Debit | Credit | ||||||
| Fixed Asset | ||||||||
| Gain on Sale of Asset | ||||||||
| Depreciation Expense | ||||||||
| Accumulated Depreciation | ||||||||
| I) Company P sold a half-depreciated asset with an original cost of $40,000 and annual depreciation of $4,000 to company S for $30,000. Company S recognized $3,000 in depreciation expense on the asset and it has been paid for. | ||||||||
| Account | Debit | Credit | ||||||
| Fixed Asset | ||||||||
| Gain on Sale of Asset | ||||||||
| Depreciation Expense | ||||||||
| Accumulated Depreciation |
Exercise 2
| Exercise 2: Consolidation Entries Subsequent to Purchase | ||||||||
| In 2017, Company P purchased 100% of the outstanding stock of Company S for $750,000. The FMV of Company S's | ||||||||
| net assets was $500,000, and the only item where FMV differed from book value was Inventory, which | ||||||||
| had a FMV $75,000 greater than book. Company P uses the equity method to account for the income of Company | ||||||||
| S, and no dividends were declared in 2017 | ||||||||
| Required: | ||||||||
| Calculate and enter the combined trial balance | ||||||||
| Post the entries required to eliminate the subsidiary's equity (reference as "A") | ||||||||
| Post the entries required to account for adjustments to FMV and any goodwill (reference as "B") | ||||||||
| Post the entries required to eliminate any investment income booked (reference as "C") | ||||||||
| Calculate and enter the consolidated trial balance | ||||||||
| 2017 Trial Balances | Consolidation Entries | Consolidated Trial Balance | ||||||
| Company P | Company S | Combined | Debits | Credits | ||||
| Cash | $500,000 | $75,000 | ||||||
| A/R | 250,000 | 50,000 | ||||||
| Inventory | 300,000 | 500,000 | B | |||||
| Net Fixed Assets | 750,000 | 150,000 | ||||||
| Investment in S | 1,050,000 | 0 | A | |||||
| B | ||||||||
| C | ||||||||
| Goodwill | B | |||||||
| A/P | (450,000) | (50,000) | ||||||
| Notes Payable | (1,000,000) | 0 | ||||||
| Common Stock P | (50,000) | 0 | ||||||
| Retained Earnings P | (300,000) | 0 | ||||||
| Common Stock S | 0 | (25,000) | A | |||||
| Retained Earnings S | 0 | (400,000) | A | |||||
| Sales | (1,500,000) | (750,000) | ||||||
| COGS | 250,000 | 150,000 | ||||||
| Other Expenses | 500,000 | 300,000 | ||||||
| Investment Income | (300,000) | C | ||||||
| $0 | $0 | $0 | $0 | $0 | $0 | |||
Exercise 3 Rodgers CPA Quiz
| Exercise 3: Rodgers CPA Review "Interactive Practice Quiz" |
| As part of your registration for this course, each student is given access to the Rodgers CPA Review website, a great resource for both lecture material and review / expectation of the actual CPA exam. For our course, we're going to be utilizing Rodgers' "Interactive Practice Quizzes". The "Interactive Practice Quizzes" are a great resource for developing an understanding of the material at hand - they are not intended to be assessments. When taking an "Interactive Practice Quiz" you have the ability to draw from resources on the website to develop an understanding of the material in order to answer the questions. |
| In certain sections of our class, you're going to be asked to answer the multiple choice questions within specific sections of Rodgers CPA Review "Interactive Practice Quizzes". Below will be specific instructions on which area to work on, and what you need to complete and post up on this page to demonstrate your participation in these activities. |
| For the first three weeks of this class we'll be covering business combinations and consolidations, which align to the FAR 31 section in Rodgers CPA Review. There is an "Interactive Practice Quiz" for FAR 31 which contains approximately 60 questions. For weeks #1 through #3 of this class, you'll be working through this "Interactive Practice Quiz". |
| For week #3, you will be required to have attempted all of the multiple choice questions in the FAR 31 Business Combinations & Consolidations "Interactive Practice Quiz" and successfully answer at least 45 of those (40/30 should have already been done in week #1 and week #2). |
| To complete this week's requirement, attempt the remainder of the questions with at least 15 correct responses, and then take a screen shot of your completion summary. Insert the screen shot below and simply submit with this file when uploaded this completed homework assignment. |
