Alpha Company purchased 100% of the outstanding stock of Beta, Inc., on January 1, 2023, for a
Question:
Alpha Company purchased 100% of the outstanding stock of Beta, Inc., on January 1, 2023, for a purchase price of $1,600,000. At the acquisition date, Beta's book value consisted of common stock of $800,000 and retained earnings of $550,000. Alpha attributed the cost over book to machinery with an estimated 10-year remaining useful life. Alpha uses the equity method to account for its investment in Beta. During the next two years, Beta reported the following:
| Year | Income | Dividends Declared | Inventory Transfers to Alpha at Transfer Price |
| 2023 | $270,000 | $60,000 | $280,000 |
| 2024 | $305,000 | $75,000 | $310,000 |
Beta sells inventory to Alpha after a markup based on a gross profit rate. At the end of 2023 and 2024, 30 percent of the current year's purchases remain in Alpha's inventory.
Required
Create an Excel spreadsheet that computes the following: Investment in Beta, Inc., account as of December 31, 2024. Worksheet adjustments (consolidation journal entries) for the December 31, 2024, consolidation of Alpha and Beta. Your solution should be formulated so that Beta's gross profit rate on sales to Alpha is treated as a variable (this requires using formulas in your Excel spreadsheet!). Most amounts should be formula-driven so that when you change the gross profit rate (or any other variable), all other numbers update, including the equity income, balance in the investment account, and amount of the worksheet adjustments. Use formulas everywhere you reasonably can.
Expert Answer:
Investment in Beta Inc analysis 01012023 to 31122024 Consideration paid fair value 01012023 1600000 ... View the full answer
