accounts data bank

| August 14, 2017

7.
On January 1, 20X8, Parent Company purchased 90% of
the common stock of Subsidiary Company for $350,000. On this date, Subsidiary
had common stock, other paid in capital, and retained earnings of $20,000, $
130,000, and $200,000 respectively.

Any
excess of cost over book value is due to goodwill.

In both 20X8 and 20X9, Parent has accounted for the Investment
in Subsidiary using the cost method.
On January
1, 20X8, Subsidiary sold $100,000 par value of 6%, ten-year bonds for $97,000.
The bonds pay interest semi-annually on January 1 and July 1 of each year.

On January 1, 20X9, Parent repurchased all of Subsidiary’s bonds
for $96,400. The bonds are still held on December 31, 20X9.
Both companies have correctly recorded all entries relative to
bonds and interest, using straight-line amortization for premium or discount.

5-17

Chapter
5

Required:

Complete the Figure 5-6 worksheet for consolidated financial
statements for the year ended of December 31, 20X9. Round all computations to
the nearest dollar.

5-18

Chapter 5

8.
On January 1, 20X8, Parent Company purchased 90% of
the common stock of Subsidiary Company for $350,000. On this date, Subsidiary
had common stock, other paid in capital, and retained earnings of $20,000, $
130,000, and $200,000, respectively.

Any
excess of cost over book value is due to goodwill.

In both 20X8 and 20X9, Parent has accounted for the Investment
in Subsidiary using the simple equity method.
On January
1, 20X8, Subsidiary sold $100,000 par value of 6%, ten-year bonds for $97,000.
The bonds pay interest semi-annually on January 1 and July 1 of each year.

On January 1, 20X9, Parent repurchased all of Subsidiary’s bonds
for $96,400. The bonds are still held on December 31, 20X9.
Both companies have correctly recorded all entries relative to
bonds and interest, using straight-line amortization for premium or discount.

Required:

Complete the Figure 5-7 worksheet for consolidated financial
statements for the year ended of December 31, 20X9. Round all computations to
the nearest dollar.

9.
On January 1, 20X8, Parent Company purchased 90% of
the common stock of Subsidiary Company for $355,000. On this date, Subsidiary
had common stock, other paid in capital, and retained earnings of $20,000,
$130,000, and $200,000 respectively.

Any
excess of cost over book value is due to goodwill.

In both 20X8 and 20X9, Parent has accounted for the Investment
in Subsidiary using the simple equity method.
On July 1,
20X8, Subsidiary sold $100,000 par value of 9%, ten-year bonds for $106,755,
which resulted in an effective interest rate of 8%. The bonds pay interest
semi-annually on January 1 and July 1 of each year. Subsidiary uses the
effective-interest method of amortizing the premium.

An amortization table for 20X8 and 20X9 is
presented below:

Carrying

Carrying

Effective

Interest

Nominal

Premium

Value on

Value

Interest

Expense

Interest

Write-off

7-1-X8

$106,755

4%

$4,270

$4,500

– $230

1-1-X9

230

4%

4,261

4,500

239

106,525

7-1-X9

239

4%

4,251

4,500

249

106,286

249

.gif”>12-31-X9 $106,037
========

On July 1,
20X9, Parent repurchased all of Par’s bonds for $94,153, which resulted in an
effective interest rate of 10%. The bonds are still held at year end.

Both
companies have correctly recorded all entries relative to bonds and interest.

Required:

Complete the Figure 5-8 worksheet for consolidated financial
statements for the year ended of December 31, 20X9. Round all computations to
the nearest dollar.

5-20

5-21

Chapter 5

10.
On January 1, 20X7 Parent Company acquired 90% of
the common stock of Subsidiary Company for $365,000. On this date, Subsidiary
had common stock, other paid in capital, and retained earnings of $50,000,
$100,000, and $200,000 respectively.

In both 20X7 and 20X8, Parent has accounted for the Investment
in Subsidiary using the simple equity method.
On January
1, 20X8, Parent purchased equipment for $204,120 and immediately leased the
equipment to Subsidiary on a 4-year lease. The minimum lease payments of
$60,000 are to be made annually on January 1, beginning immediately, for a
total of 4 payments. The implicit interest rate is 12%. The lease provides for
an automatic transfer of title at the end of 4 years. The estimated useful life
of the equipment is 6 years. The lease has been capitalized by both companies.

A lease amortization schedule, applicable to either company, is
presented below:

Carrying

Carrying

Interest

Interest

Payment

Principal

Value on

Value

Rate

Reduction

1-1-X8

$204,120

1-1-X8

– 60,000

12%

$17,294

$60,000

$42,706

144,120

1-1-X9

– 42,706

12%

12,170

60,000

47,830

101,414

1-1-Y0

– 47,830

12%

6,416*

60,000

53,584

53,584

1-1-Y1

– 53,584

*Adjusted for rounding error.

$

0

========

Required:

Complete
the Figure 5-9 worksheet for consolidated financial statements for the year
ended December 31, 20X8. Round all computations to the nearest dollar.

5-22

Chapter 5

5-23

Chapter 5

11.
On January 1, 20X7, Parent Company acquired 90% of
the common stock of Subsidiary Company for $365,000. On this date, Subsidiary
had common stock, other paid in capital, and retained earnings of $50,000,
$100,000, and $200,000 respectively.

In 20X7, 20X8, and 20X9, Parent has accounted for the Investment
in Subsidiary using the simple equity method.
On January
1, 20X8, Parent purchased equipment for $204,120 and immediately leased the
equipment to Subsidiary on a 4-year lease. The minimum lease payments of
$60,000 are to be made annually on January 1, beginning immediately, for a
total of 4 payments. The implicit interest rate is 12%. The lease provides for
an automatic transfer of title at the end of 4 years. The estimated useful life
of the equipment is 6 years. The lease has been capitalized by both companies.

A lease amortization schedule, applicable to either company, is
presented below:

Carrying

Carrying

Interest

Interest

Payment

Principal

Value on

Value

Rate

Reduction

1-1-X8

$204,120

1-1-X8

– 60,000

12%

$17,294

$60,000

$42,706

144,120

1-1-X9

– 42,706

12%

12,170

60,000

47,830

101,414

1-1-Y0

– 47,830

12%

6,416*

60,000

53,584

53,584

1-1-Y1

– 53,584

*Adjusted for
rounding error

$

0

========

Required:

Complete
the Figure 5-10 worksheet for consolidated financial statements for the year ended
December 31, 20X9. Round all computations to the nearest dollar.

5-24

Chapter 5

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