Information: On January 1, 2015, the Herco Company purchased 70% of the outstanding voting share of...
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Information: On January 1, 2015, the Herco Company purchased 70% of the outstanding voting share of the Wing Company for $ 850,000 in cash. On that date, the Wing Company had retained earnings of $ 400,000 and common shares of $ 500,000. On the acquisition date, the identifiable assets and liabilities of the Wing Company had fair values that were equal to their carrying values except for the building, which had a fair value 200,000 greater that its carrying value, and long term liabilities which had fair values that were $ 100,000 great than their carrying values. The building had a remaining useful life of ten years on January 1, 2015 and the long term liabilities mature on December 31, 2021. Both companies use the straight line method to calculate all depreciation and amortization. The trial balances of the Herco Company and Wing Company on December 31, 2019 are contained on the attached excel sheet. Included in Wing's Dec. 31, 2019 inventory were goods purchased from Herco in 2019 for $ 30,000. Herco charges all customers 20% over cost. Included in Herco's Dec. 31, 2019 inventory were goods purchased from Wing in 2019 for $40,000. Wing charges all customers a markup on cost of 25%. On Dec. 31, 2019 Herco purchased a bond investment at a cost of $ 250,000 in the open market which represented 50% of the bond payable that had been issued at par value by Wing in January 2019. Goodwill was impaired by $ 50,000 at December 31, 2019. No changes in common shares have occurred in Wing since the date of acquisition. Required: For the Herco Company and its subsidiary, the Wing Company, prepare in worksheet format (using the attached excel worksheet): 1 (a). The consolidated income statement for the year ended December 31, 2019. 1 (b).The consolidated statement of financial position at December 31, 2019. 2.Prepare all required consolidation journal entries on a second excel page attached to your consolidation worksheet. Hints: 1-Preparation of an Acquisition Differential Amortization Schedule may be of assistance. 2-Ignore all tax effects. 2 Consolidation Problem 3 Due date: July 22, 2021 by 6pn Trial Balance December 31, 2019. 4 5 6 7 8 9 10 Accounts receivable 11 Account receivable, Wing 12 Inventories 13 Equipment (net) Assets Cash 14 Buildings (net) 15 Investment in Bond 16 17 Investment in Win (cost) 18 19 Liabilities and Equity 20 Accounts payable 21 Account payable, Wing 22 Long term liabilities 23 Bond payable 24 Common shares 25 Retained earnings, beginning of year 26 Dividends declared and paid in year 27 28 29 Revene and Expenses 30 Sales revenue 31 Other revenue 32 Cost of goods sold 33 Depreciation expense 34 Other expenses 35 36 Herco Herco Ving Ving Debit Credit Debit Credit 50,000 220,000 80,000 2,700,000 6,150,000 2,600,000 250,000 850,000 200,000 2,000,000 300,000 200,000 280,000 20,000 4,000,000 3,000,000 4,500,000 3,500,000 300,000 10,000 100,000 0 520,000 2,500,000 500,000 20,000 400,000 100,000 150,000 170,000 0 600,000 500,000 500,000 1,600,000 900,000 30,000 I ***** ### ***** ***** Consolidation Adjustments Debit Debit Credit Credit Herco Herco Consolidated Income Statem Consolidated Statement of Financial Position For the Year Ended Dec. 31, 2 December 31, 2019. Debit Credit Debit Credit Information: On January 1, 2015, the Herco Company purchased 70% of the outstanding voting share of the Wing Company for $ 850,000 in cash. On that date, the Wing Company had retained earnings of $ 400,000 and common shares of $ 500,000. On the acquisition date, the identifiable assets and liabilities of the Wing Company had fair values that were equal to their carrying values except for the building, which had a fair value 200,000 greater that its carrying value, and long term liabilities which had fair values that were $ 100,000 great than their carrying values. The building had a remaining useful life of ten years on January 1, 2015 and the long term liabilities mature on December 31, 2021. Both companies use the straight line method to calculate all depreciation and amortization. The trial balances of the Herco Company and Wing Company on December 31, 2019 are contained on the attached excel sheet. Included in Wing's Dec. 31, 2019 inventory were goods purchased from Herco in 2019 for $ 30,000. Herco charges all customers 20% over cost. Included in Herco's Dec. 31, 2019 inventory were goods purchased from Wing in 2019 for $40,000. Wing charges all customers a markup on cost of 25%. On Dec. 31, 2019 Herco purchased a bond investment at a cost of $ 250,000 in the open market which represented 50% of the bond payable that had been issued at par value by Wing in January 2019. Goodwill was impaired by $ 50,000 at December 31, 2019. No changes in common shares have occurred in Wing since the date of acquisition. Required: For the Herco Company and its subsidiary, the Wing Company, prepare in worksheet format (using the attached excel worksheet): 1 (a). The consolidated income statement for the year ended December 31, 2019. 1 (b).The consolidated statement of financial position at December 31, 2019. 2.Prepare all required consolidation journal entries on a second excel page attached to your consolidation worksheet. Hints: 1-Preparation of an Acquisition Differential Amortization Schedule may be of assistance. 2-Ignore all tax effects. 2 Consolidation Problem 3 Due date: July 22, 2021 by 6pn Trial Balance December 31, 2019. 4 5 6 7 8 9 10 Accounts receivable 11 Account receivable, Wing 12 Inventories 13 Equipment (net) Assets Cash 14 Buildings (net) 15 Investment in Bond 16 17 Investment in Win (cost) 18 19 Liabilities and Equity 20 Accounts payable 21 Account payable, Wing 22 Long term liabilities 23 Bond payable 24 Common shares 25 Retained earnings, beginning of year 26 Dividends declared and paid in year 27 28 29 Revene and Expenses 30 Sales revenue 31 Other revenue 32 Cost of goods sold 33 Depreciation expense 34 Other expenses 35 36 Herco Herco Ving Ving Debit Credit Debit Credit 50,000 220,000 80,000 2,700,000 6,150,000 2,600,000 250,000 850,000 200,000 2,000,000 300,000 200,000 280,000 20,000 4,000,000 3,000,000 4,500,000 3,500,000 300,000 10,000 100,000 0 520,000 2,500,000 500,000 20,000 400,000 100,000 150,000 170,000 0 600,000 500,000 500,000 1,600,000 900,000 30,000 I ***** ### ***** ***** Consolidation Adjustments Debit Debit Credit Credit Herco Herco Consolidated Income Statem Consolidated Statement of Financial Position For the Year Ended Dec. 31, 2 December 31, 2019. Debit Credit Debit Credit
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Related Book For
Intermediate Accounting
ISBN: 978-0132162302
1st edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Posted Date:
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