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Graded Quiz 04

1) P Company acquired 80% of S Company's common stock on January 1, 20x4 for P372,000. There were differences between book and market values of some of S Company's assets and liabilities. 2) In 20x4, there was an intercompany sale of equipment from P to S on April 1 and from S to P on January 2. 3) Trial balances are provided for P and S for 20x4 and 20x5 which will be used to prepare elimination and adjusting entries for partial goodwill using the cost method as of December 31, 20x4 and 20x5.

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220 views2 pages

Graded Quiz 04

1) P Company acquired 80% of S Company's common stock on January 1, 20x4 for P372,000. There were differences between book and market values of some of S Company's assets and liabilities. 2) In 20x4, there was an intercompany sale of equipment from P to S on April 1 and from S to P on January 2. 3) Trial balances are provided for P and S for 20x4 and 20x5 which will be used to prepare elimination and adjusting entries for partial goodwill using the cost method as of December 31, 20x4 and 20x5.

Uploaded by

Tasha Marie
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ADVACC 03: GRADED QUIZ 04

NAME: DATE:

On January 1, 20x4, P Company acquires 80% of the common stock of S Company for P372,000. At that time, the following assets
and liabilities of S Company had book values that were different from their respective market values:
S Co. (BV) S Co. (FV)
Inventory ………………………………………… P24,000 P30,000
Land ………………………………………… 48,000 55,200
Equipment ………………………………………… 180,000 180,000
Accum. depreciation – equipment …………………. (96,000)
Buildings ………………………………………… 360,000 144,000
Accum. depreciation – buildings ………………………. (192,000)
Bonds payable (5 years) ……………………………… 120,000 115,200

All other assets and liabilities had book values approximately equal to their respective fair values. On January 1, 20x4, the equipment
and buildings had a remaining life of 4 and 8 years respectively. Inventory is sold in 20x4 and FIFO inventory costing is used.
Goodwill, if any, is reduced annually by a P3,000 impairment loss.

The were no intercompany sales prior to 20x4, information resulting from intercompany sales of equipment are summarized below

Date of sale Seller Selling Price Orig. Cost Accum. Depr. Remaining Life
4/1/20x4 P Co. P90,000 P120,000 P45,000 6 years
1/2/20x4 S Co. 60,000 72,000 43,200 4 years

Trial balances for the companies for the year ended December 31, 20x4 are as follows:

Debits P Co. S Co.


Cash ……………………………………………… 232,800 90,000
Accounts receivable …………………………………… 90,000 60,000
Inventory ……………………………………………… 120,000 90,000
Land ……………………………………………… 210,000 48,000
Equipment ……………………………………………… 240,000 180,000
Building ……………………………………………… 720,000 540,000
Investment in S Co. …………………………………… 372,000
Cost of goods sold …………………………………… 204,000 138,000
Depreciation expense …………………………………… 60,000 24,000
Other expenses ……………………………………………… 48,000 18,000
Dividends paid ……………………………………………… 72,000 36,000
Totals 2,368,800 1,224,000
Credits
Accum. Depreciation – equipment ……………………….. 135,000 96,000
Accum. Depreciation – buildings ………………………… 405,000 288,000
Accounts payable ……………………………………. 105,000 88,800
Bonds payable ………………………………………………. 240,000 120,000
Common stock, P10 par ……………………………………. 600,000 240,000
Retained earnings …………………………………… 360,000 120,000
Sales ………………………………………………………… 480,000 240,000
Gain on sale of equipment ……………………………….. 15,000 31,200
Dividend income …………………………………… 28,800 .
Totals 2,368,800 1,224,000

Trial balances for the companies for the year ended December 31, 20x5 are as follows:

Debits P Co. S Co.


Cash ……………………………………………… 265,200 102,000
Accounts receivable …………………………………… 180,000 96,000
Inventory ……………………………………………… 216,000 108,000
Land ……………………………………………… 210,000 48,000
Equipment ……………………………………………… 240,000 180,000
Building ……………………………………………… 720,000 540,000
Investment in S Co. …………………………………… 372,000
Cost of goods sold …………………………………… 216,000 192,000
Depreciation expense …………………………………… 60,000 24,000
Other expenses ……………………………………………… 72,000 54,000
Dividends paid ……………………………………………… 72,000 48,000
Totals 2,623,200 1,392,000
ADVACC 03: GRADED QUIZ 04

Credits
Accum. Depreciation – equipment ……………………….. 150,000 102,000
Accum. Depreciation – buildings ………………………… 450,000 306,000
Accounts payable ……………………………………. 105,000 88,800
Bonds payable ………………………………………………. 240,000 120,000
Common stock, P10 par ……………………………………. 600,000 240,000
Retained earnings …………………………………… 499,800 175,200
Sales ………………………………………………………… 540,000 360,000
Dividend income …………………………………… 38,400 .
Totals 2,623,200 1,392,000

REQUIRED: Using cost model – Partial Goodwill Method prepare the working paper elimination and adjusting entries:
a. December 31, 20x4
b. December 31, 20x5

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