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.

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.

Answer rating: 100% (QA)

31Mar05 Dr Investment in Downey Enterprises 3645000 Cr Cash 3645000 31Dec05 Dr Investment in Downey Enterprises 635000 x 75 476250 Cr Investment incom... View the full answer