Page 588 - Accounting Principles (A Business Perspective)

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equity
a. Prepare general journal entries to record the investment and the effect of Orr's earnings and dividends on
Prime Company's accounts.
b. Prepare the elimination entry that would be made on the work sheet for a consolidated balance sheet as of the

date of acquisition.
Alternate problem D Codd Company acquired 70 per cent of the outstanding voting common stock of Snow
Company for USD 8,568,000 on 2010 January 1. The investment is accounted for under the equity method. During
the years 2010-2012, Snow Company reported the following:
Net Income Dividends
(loss) Paid
2007 $1,454,880 $871,920
2008 372,960 223,440
2009 (23,520) 55,860
a. Prepare general journal entries to record the investment and the effect of the subsidiary's income, losses, and
dividends on Codd Company's accounts.
b. Compute the investment account balance on 2011 December 31.
Alternate problem E Maple Company acquired all of the outstanding voting common stock of Dodd Company
on 2010 January 2, for USD 4,320,000. On the date of acquisition, the balance sheets for the two companies were
as follows:
Maple Dodd
Company Company
Assets
Cash $ 900,000 $270,000
Accounts receivable, net 432,000 360,000
Notes receivable 180,000 108,000
Merchandise inventory 1,368,000 864,000
Investment in Dodd Company 4,320,000
Equipment, net 1,224,000 738,000
Building, net 3,330,000 1,656,000
Land 1,404,000 450,000
Total assets $13,158,000 $4,446,000
Liabilities and stockholders' equity
Accounts payable $792,000 $360,000
Notes payable 216,000 252,000
Common stock - $120 par value 9,540,000 3,564,000
Retained earnings 2,610,000 270,000
Total liabilities and stockholders' equity $12,158,000 $4,446,000
The management of Maple Company thinks that the Dodd Company's land is undervalued by USD 162,000. The
remainder of the excess of cost over book value is due to superior earnings potential.
On the date of acquisition, Dodd Company borrowed USD 180,000 from Maple Company by giving a note.
a. Prepare a work sheet for a consolidated balance sheet as of the date of acquisition.

b. Prepare a consolidated balance sheet for 2010 January 2.
Alternate problem F Refer back to the previous problem. Maple Company uses the equity method. Assume
the following amounts are taken from the adjusted trial balances of Maple Company and Dodd Company on 2010
December 31:
Maple Dodd
Company Company
Debit balance accounts
Cash $ 864,000 $ 364,295
Accounts receivable, net 553,536 414,000
Notes receivable 342,000 90,000
Merchandise inventory, December 31 1,530,000 1,008,000

Accounting Principles: A Business Perspective 589 A Global Text