EXERCISE 3-14 Equity method journal entries, 75 percent ownership, purchase differentials, negative

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EXERCISE 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.             
    • Posted: 4 years ago
    • Budget: $20
     
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