On July 1, 2015, Pearl Industries sold administrative equipment with a book value of $600,000 to its subsidiary, Shiek Shoes, for $700,000. At the date of sale, the equipment had a remaining life of five years. It is being straight-line depreciated on Shiekâs books. It is now December 31, 2017, the end of the accounting year, and you are preparing the working paper to consolidate the trial balances of Pearl and Shiek. Shiek still owns the equipment.
a) Prepare the necessary consolidation eliminating entries at December 31, 2017.
b) It is now December 31, 2018. Prepare the required eliminating entries for this intercompany equipment transaction for the December 31, 2018, consolidation working paper.
c)Now assume that Shiek sells the equipment to an outside party for $300,000 on January 1, 2019. Prepare the required eliminating entries for the December 31, 2019, consolidation working paper.
On July 1, 2015, Pearl Industries sold administrative equipment with a book value of $600,000 to its subsidiary, Shiek Shoes, for $700,000. At the date of sale, the equipment had a remaining life of five years. It is being straight-line depreciated on Shiekâs books. It is now December 31, 2017, the end of the accounting year, and you are preparing the working paper to consolidate the trial balances of Pearl and Shiek. Shiek still owns the equipment.
a) Prepare the necessary consolidation eliminating entries at December 31, 2017.
b) It is now December 31, 2018. Prepare the required eliminating entries for this intercompany equipment transaction for the December 31, 2018, consolidation working paper.
c)Now assume that Shiek sells the equipment to an outside party for $300,000 on January 1, 2019. Prepare the required eliminating entries for the December 31, 2019, consolidation working paper.
Related questions
Crow Corporation purchased 70 percent of West Company's votingcommon stock on January 1, 20X5, for $301,700. On that date, thenoncontrolling interest had a fair value of $129,300 and the bookvalue of West's net assets was $395,000. The book values and fairvalues of West's assets and liabilities were equal except for landthat had a fair value $14,000 higher than book value. The amountattributed to goodwill as a result of the acquisition is notamortized and has not been impaired. |
| CROW CORPORATION AND WEST COMPANY Trial Balance Data December 31, 20X9 | ||||||||
| Crow Corporation | West Company | |||||||
| Item | Debit | Credit | Debit | Credit | ||||
| Cash andReceivables | $ | 98,300 | $ | 102,000 | ||||
| Inventory | 212,000 | 110,000 | ||||||
| Land, Buildings,& Equipment (net) | 278,000 | 258,000 | ||||||
| Investment in WestCompany Stock | 308,108 | |||||||
| Cost of Goods &Services | 195,000 | 145,000 | ||||||
| DepreciationExpense | 39,000 | 29,000 | ||||||
| DividendsDeclared | 34,000 | 6,000 | ||||||
| Sales & ServiceRevenue | $ | 302,000 | $ | 202,000 | ||||
| Income fromSubsidiary | 27,708 | |||||||
| AccountsPayable | 55,000 | 22,000 | ||||||
| Common Stock | 199,000 | 165,000 | ||||||
| RetainedEarnings | 580,700 | 261,000 | ||||||
| Total | $ | 1,164,408 | $ | 1,164,408 | $ | 650,000 | $ | 650,000 |
On January 1, 20X9, Crow's inventory contained $34,000 ofunrealized intercompany profits recorded by West. West's inventoryon that date contained $15,000 of unrealized intercompany profitsrecorded on Crowâs books. Both companies sold their ending 20X8inventories to unrelated companies in 20X9. |
During 20X9, West sold inventory costing$55,000 to Crow for $80,000. Crow held all inventory purchased fromWest during 20X9 on December 31, 20X9. Also during 20X9, Crow soldgoods costing $58,200 to West for $97,000. West continues to hold$32,980 of its purchase from Crow on December 31, 20X9. Assume Crowuses the fully adjusted equity method. |
| Required: | |
| a. | Prepare all consolidation entries needed to complete aconsolidation worksheet as of December 31, 20X9. (If noentry is required for a transaction/event, select "No journal entryrequired" in the first account field.) |
| b. | Prepare a consolidation worksheet as of December 31, 20X9.(Values in the first two columns (the "parent" and"subsidiary" balances) that are to be deducted should be indicatedwith a minus sign, while all values in the "Consolidation Entries"columns should be entered as positive values. For accounts wheremultiple adjusting entries are required, combine all debit entriesinto one amount and enter this amount in the debit column of theworksheet. Similarly, combine all credit entries into one amountand enter this amount in the credit column of theworksheet.) |
Crow Corporation purchased 70 percent of West Company's votingcommon stock on January 1, 20X5, for $296,100. On that date, thenoncontrolling interest had a fair value of $126,900 and the bookvalue of West's net assets was $387,000. The book values and fairvalues of West's assets and liabilities were equal except for landthat had a fair value $14,000 higher than book value. The amountattributed to goodwill as a result of the acquisition is notamortized and has not been impaired. |
| CROW CORPORATION AND WEST COMPANY Trial Balance Data December 31, 20X9 | ||||||||
| Crow Corporation | West Company | |||||||
| Item | Debit | Credit | Debit | Credit | ||||
| Cash andReceivables | $ | 99,300 | $ | 103,000 | ||||
| Inventory | 207,000 | 129,000 | ||||||
| Land, Buildings,& Equipment (net) | 277,000 | 257,000 | ||||||
| Investment in WestCompany Stock | 319,000 | |||||||
| Cost of Goods &Services | 188,000 | 138,000 | ||||||
| DepreciationExpense | 25,000 | 15,000 | ||||||
| DividendsDeclared | 20,000 | 5,000 | ||||||
| Sales & ServiceRevenue | $ | 308,000 | $ | 208,000 | ||||
| Income fromSubsidiary | 54,000 | |||||||
| AccountsPayable | 56,000 | 20,000 | ||||||
| Common Stock | 196,000 | 157,000 | ||||||
| RetainedEarnings | 521,300 | 262,000 | ||||||
| Total | $ | 1,135,300 | $ | 1,135,300 | $ | 647,000 | $ | 647,000 |
On January 1, 20X9, Crow's inventory contained $50,000 ofunrealized intercompany profits recorded by West. West's inventoryon that date contained $15,000 of unrealized intercompany profitsrecorded on Crowâs books. Both companies sold their ending 20X8inventories to unrelated companies in 20X9. |
During 20X9, West sold inventory costing$48,000 to Crow for $73,000. Crow held all inventory purchased fromWest during 20X9 on December 31, 20X9. Also during 20X9, Crow soldgoods costing $75,000 to West for $125,000. West continues to hold$42,500 of its purchase from Crow on December 31, 20X9. Assume Crowuses the fully adjusted equity method. |
| Required: | |||||
| a. | Prepare all consolidation entries needed to complete aconsolidation worksheet as of December 31, 20X9. (If noentry is required for a transaction/event, select "No journal entryrequired" in the first account field.)
| ||||
Eli Enterprises has just completed its first full year of operations on December 31, 2018. It provides accounting services to not-for-profit organizations. The unadjusted (normal) trial balance is presented below:
| Eli Enterprises | |||||
| Trail Balance â unadjusted (normal) | |||||
| As of December 31, 2018 | |||||
| Account Title | Debit | Credit | |||
| Cash | $ 20,000 | $ . | |||
| Accounts Receivable | 50,000 | ||||
| Supplies | 5,000 | ||||
| Prepaid Rent | 7,200 | ||||
| Equipment | 200,000 | ||||
| Notes Payable | 75,000 | ||||
| Accounts Payable | 15,000 | ||||
| Unearned Service Revenues | 12,000 | ||||
| Common Stock | 100,000 | ||||
| Retained Earnings | 50,000 | ||||
| Dividends | 1,300 | ||||
| Service Revenues | 800,000 | ||||
| Salaries Expenses | 700,000 | ||||
| Advertising Expense | 50,000 | ||||
| Utilities Expenses | 18,500 |
| |||
| Total | $ 1,052,000 | $ 1,052,000 | |||
An analysis of the firmâs records reveals the following:
a. Equipment purchased January 1, 2018, has an estimated life of ten years.
b. Utilities expense does not include the expense for December, estimated at $1,650. The bill will not arrive until January, 2019.
c. The balance in Prepaid Rent represents the amount paid for a three-year insurance beginning on January 1, 2018.
d. On July 1, 2018, management borrowed $ 75,000 on a two-year note paying interest of four percent each year.
e. On September 25, 2018, management received $ 12,000 (unearned service revenues) to perform services from October 1, 2018 through June 30, 2019, nine months.
Required: Prepare adjusting entries in journal entry form.
