60.1K

Verified Solution

Link Copied!

Prince Corporation acquired 100 percent of Sword Company on January 1, 20X7, for $188,000. The trial balances for the two companies on December 31, 20X7, included the following amounts:

	Prince Corporation									Sword Company
Item	Debit				Credit					Debit				Credit
Cash		$	94,000								$	39,000
Accounts Receivable			53,000									58,000
Inventory			188,000									108,000
Land			92,000									34,000
Buildings and Equipment			494,000									161,000
Investment in Sword Company			217,000
Cost of Goods Sold			494,000									257,000
Depreciation Expense			24,000									14,000
Other Expenses			74,000									74,000
Dividends Declared			56,000									26,000
Accumulated Depreciation						$	151,000								$	70,000
Accounts Payable							64,000									28,000
Mortgages Payable							189,000									141,000
Common Stock							294,000									45,000
Retained Earnings							348,000									84,000
Sales							685,000									403,000
Income from Sword Company							55,000
		$	1,786,000			$	1,786,000				$	771,000			$	771,000

Additional Information

1. On January 1, 20X7, Sword reported net assets with a book value of $129,000. A total of $26,000 of the acquisition price is applied to goodwill, which was not impaired in 20X7.
2. Swords depreciable assets had an estimated economic life of 11 years on the date of combination. The difference between fair value and book value of tangible assets is related entirely to buildings and equipment.
3. Prince used the equity-method in accounting for its investment in Sword.
4. Detailed analysis of receivables and payables showed that Sword owed Prince $23,000 on December 31, 20X7.

• Record the optional accumulated depreciation consolidation entry.

Note: Enter debits before credits.

	Event Accounts Debit Credit 5

• Record the basic consolidation entry.

Note: Enter debits before credits.

	Event Accounts Debit Credit 1

• Record the amortized excess value reclassification entry.

Note: Enter debits before credits.

	Event Accounts Debit Credit 2

• Record the excess value (differential) reclassification entry.

Note: Enter debits before credits.

	Event Accounts Debit Credit 3

• Record the entry to eliminate the intercompany accounts.

Note: Enter debits before credits.

	Event Accounts Debit Credit 4

Answer & Explanation Solved by verified expert

See Answer