exercise 3-14

Project Description:

complete parts a, b, & c of exercise 3-14 in ch. 3 of advanced accounting.

exercise 3-14
crane mechanics acquired 75 percent of downey enterprises on march 31, 2005, for $3,645,000.
downey’s book value at that date totaled $4,000,000. appraisal values were greater than book values
for identifiable assets in the following amounts: inventory ($300,000) and plant and equipment
($700,000). the purchase differential for inventory is to be amortized over five months and plant and
equipment over ten years. for the remainder of 2005 downey reports $635,000 of income and pays
$100,000 in dividends. the following balances exist for crane at december 31, 2005, and downey
at march 31 and december 31, 2005.

required:
a. record the journal entries necessary on crain’s books for 2005 assuming that crain uses the
equity method to account for its investment in downey.
b. prepare all worksheet eliminations in journal entry form necessary to consolidate crain and
downey at december 31, 2005.
c. prepare the consolidation worksheet for crain and downey at december 31, 2005.
note: exercises 3-15, 3-16, and 3-17 repeat exercises 3-10, 3-11, and 3-12 with the parent company using the cost
method to account for the investment.

i will send the chapter once you are hired that has the balance sheet figures for crain at 12/31/05 and downey at 3/31/05 and 12/31/05
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