Using the Option 1 spreadsheet (linked at the bottom of this page), review the journal entries, Peerless (P) company entries for 20x7, and the book value calculation for Peerless Company.
Required information:
1). Required entry for investment equity using case
2a). Record of parent 100% share of subsidiary 20x7 income
2b). Record of parent 100% share of subsidiaryâs 20x7 dividend
3). Book value calculation for Investment value on December 30, 20x7
Follow instructions from the worksheet carefully. Use formulas to enter amounts and data. Show details of your calculations and processes. Explain each journal entry or why one was omitted. Do not hard code numbers in the Excel Worksheet.
Peerless Products (parent company) purchased on January 02, 20x7, Special Foods (subsidiary) for $300,000. Information for acquisition entry for January 02, 20x7. Peerless Products Fair Value Consideration: $300,000 Special Foods book value of equity: Common stock $100,000 Paid in capital 50,000 Retained earnings 150,000 1). Required entry for investment equity using cash 1/2/20x7 Debit $xxxx Credit $xxxx 2). Information to complete the parent company January to December 20x7 entries Parent Subsidiary Common stock, January 02, 20x7 $600,000 $100,000 Paid in capital 100,000 50,000 Retained earnings 300,000 150,000 Separate operating income - parent 200,000 Net income - subsidiary 100,000 Dividends 100,000 50,000 2A). Parent company entry for the year Debit $xxxx Credit $xxxx Record of parent 100% share of subsidiary 20x7 income 2B) Parent company entry of the year Debit $xxx Credit $XXX Record parent 100% share of subsidiaries 20x7 dividend 3). Book value calculation for investment value on December 30, 20x7 Total investments equals Common stock Paid In capital Retained earnings Original book value $xxx $xxx $xxx $xxx Net income XXX XXX Less dividends XXX XXX Ending book value XXX XXX XXX XXX
Using the Option 1 spreadsheet (linked at the bottom of this page), review the journal entries, Peerless (P) company entries for 20x7, and the book value calculation for Peerless Company.
Required information:
1). Required entry for investment equity using case
2a). Record of parent 100% share of subsidiary 20x7 income
2b). Record of parent 100% share of subsidiaryâs 20x7 dividend
3). Book value calculation for Investment value on December 30, 20x7
Follow instructions from the worksheet carefully. Use formulas to enter amounts and data. Show details of your calculations and processes. Explain each journal entry or why one was omitted. Do not hard code numbers in the Excel Worksheet.
| Peerless Products (parent company) purchased on January 02, 20x7, Special Foods (subsidiary) for $300,000. | ||||||||||||
| Information for acquisition entry for January 02, 20x7. | ||||||||||||
| Peerless Products Fair Value Consideration: | $300,000 | |||||||||||
| Special Foods book value of equity: | ||||||||||||
| Common stock | $100,000 | |||||||||||
| Paid in capital | 50,000 | |||||||||||
| Retained earnings | 150,000 | |||||||||||
| 1). Required entry for investment equity using cash | ||||||||||||
| 1/2/20x7 | Debit | $xxxx | ||||||||||
| Credit | $xxxx | |||||||||||
| 2). Information to complete the parent company January to December 20x7 entries | ||||||||||||
| Parent | Subsidiary | |||||||||||
| Common stock, January 02, 20x7 | $600,000 | $100,000 | ||||||||||
| Paid in capital | 100,000 | 50,000 | ||||||||||
| Retained earnings | 300,000 | 150,000 | ||||||||||
| Separate operating income - parent | 200,000 | |||||||||||
| Net income - subsidiary | 100,000 | |||||||||||
| Dividends | 100,000 | 50,000 | ||||||||||
| 2A). | Parent company entry for the year | |||||||||||
| Debit | $xxxx | |||||||||||
| Credit | $xxxx | |||||||||||
| Record of parent 100% share of subsidiary 20x7 income | ||||||||||||
| 2B) | Parent company entry of the year | |||||||||||
| Debit | $xxx | |||||||||||
| Credit | $XXX | |||||||||||
| Record parent 100% share of subsidiaries 20x7 dividend | ||||||||||||
| 3). | Book value calculation for investment value on December 30, 20x7 | |||||||||||
| Total investments | equals | Common stock | Paid In capital | Retained earnings | ||||||||
| Original book value | $xxx | $xxx | $xxx | $xxx | ||||||||
| Net income | XXX | XXX | ||||||||||
| Less dividends | XXX | XXX | ||||||||||
| Ending book value | XXX | XXX | XXX | XXX | ||||||||
Related questions
On January 1, 2016, Gless Textiles issued $11 million of 8%, 20-year convertible bonds at 101. The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 40 shares of Glessâs no par common stock. Bonds that are similar in all respects, except that they are nonconvertible, currently are selling at 99 (that is, 99% of face amount). Century Services purchased 20% of the issue as an investment.
| Required: | |
| 1. | Prepare the journal entries for the issuance of the bonds by Gless and the purchase of the bond investment by Century. (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Journal entry worksheet A. Record the issuance of the bonds by Gless. B. Record the purchase of the bond investment by Century. Note: Enter debits before credits. No journal entry required Accounts receivable Allowance for uncollectible accounts Bond investment Bonds payable Building Cash Common stock Conversion expense Convertible bonds payable Debt issue costs Debt issue expense Discount on bond investment Discount on bonds payable Discount on notes payable Equipment Equityâconversion option Equityâstock warrants Fair value adjustment Gain on disposition of assets Gain on early extinguishment Gain on troubled debt restructuring Interest expense Interest payable Interest receivable Interest revenue Inventory Investment in common stock Investment in convertible bonds Investment in stock warrants Land Loss on early extinguishment Loss on sale of investment Machinery Notes payable Notes receivable Premium on bond investment Premium on bonds payable Retained earnings Unrealized holding gain Unrealized holding loss 2. Prepare the journal entries for the June 30, 2020, interest payment by both Gless and Century assuming both use the straight-line method. (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Journal entry worksheet A. Record the interest payment by Gless. B. Record the receipt of interest by Century 3. On July 1, 2021, when Glessâs common stock had a market price of $33 per share, Century converted the bonds it held. Prepare the journal entries by both Gless and Century for the conversion of the bonds (book value method). (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Journal entry worksheet A. Record the entry for Gless regarding the conversion of the bonds. B. Record the entry for Century regarding the conversion of the bonds. |
On January 1, 2016, Gless Textiles issued $11 million of 8%, 20-year convertible bonds at 101. The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 40 shares of Glessâs no par common stock. Bonds that are similar in all respects, except that they are nonconvertible, currently are selling at 99 (that is, 99% of face amount). Century Services purchased 20% of the issue as an investment.
| Required: | |
| 1. | Prepare the journal entries for the issuance of the bonds by Gless and the purchase of the bond investment by Century. (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Journal entry worksheet A. Record the issuance of the bonds by Gless. B. Record the purchase of the bond investment by Century. Note: Enter debits before credits. No journal entry required Accounts receivable Allowance for uncollectible accounts Bond investment Bonds payable Building Cash Common stock Conversion expense Convertible bonds payable Debt issue costs Debt issue expense Discount on bond investment Discount on bonds payable Discount on notes payable Equipment Equityâconversion option Equityâstock warrants Fair value adjustment Gain on disposition of assets Gain on early extinguishment Gain on troubled debt restructuring Interest expense Interest payable Interest receivable Interest revenue Inventory Investment in common stock Investment in convertible bonds Investment in stock warrants Land Loss on early extinguishment Loss on sale of investment Machinery Notes payable Notes receivable Premium on bond investment Premium on bonds payable Retained earnings Unrealized holding gain Unrealized holding loss 2. Prepare the journal entries for the June 30, 2020, interest payment by both Gless and Century assuming both use the straight-line method. (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Journal entry worksheet A. Record the interest payment by Gless. B. Record the receipt of interest by Century 3. On July 1, 2021, when Glessâs common stock had a market price of $33 per share, Century converted the bonds it held. Prepare the journal entries by both Gless and Century for the conversion of the bonds (book value method). (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Journal entry worksheet A. Record the entry for Gless regarding the conversion of the bonds. B. Record the entry for Century regarding the conversion of the bonds. |
On January 1, 20X9, Zigma Company acquired 100 percent of Standard Company's common shares at underlying book value. Zigma uses the equity method in accounting for its ownership of Standard. On December 31, 20X9, the trial balances of the two companies are as follows:
| Zigma Company | Standard Company | |||
| Item | Debit | Credit | Debit | Credit |
| Current Assets | 238,000 | 95,000 | ||
| Depreciable Assets | 300,000 | 170,000 | ||
| Investment in Standard Company | 100,000 | |||
| Other Expenses | 90,000 | 70,000 | ||
| Depreciation Expense | 30,000 | 17,000 | ||
| Dividends Declared | 32,000 | 10,000 | ||
| Accumulated Depreciation | 120,000 | 85,000 | ||
| Current Liabilities | 50,000 | 30,000 | ||
| Long-Term Debt | 120,000 | 50,000 | ||
| Common Stock | 100,000 | 50,000 | ||
| Retained Earnings | 175,000 | 35,000 | ||
| Sales | 200,000 | 112,000 | ||
| Income from Standard Company | 25,000 | |||
| 790,000 | 790,000 | 362,000 | 362,000 |
Required
a. Prepare the journal entries on Zigmaâs books for the acquisition of Standard on January 1, 20X9 as well as any normal equity-method entry(ies) related to the investment in Standard Company during 20X9.
b. Prepare the consolidation entries needed as of December 31, 20X9, to complete a consolidation worksheet.
c. Prepare a consolidation worksheet as of December 31, 20X9.
