It is now December 31, 2020 (three years since the date of acquisition). The December 31, 2020
Question:
It is now December 31, 2020 (three years since the date of acquisition). The December 31, 2020 preclosing trial balances of both companies appear on the consolidation working paper below. Porter uses the complete equity method to account for its investment in Seward. Information on intercompany transactions is as follows:
1. Seward sells merchandise to Porter at a markup of 25% on cost. Porter’s inventory at January 1, 2020 contains $875 in merchandise purchased from Seward. Porter’s inventory at December 31, 2020 contains $1,125 in merchandise purchased from Seward. Total sales from Seward to Porter during 2020 were $20,000.
2. Porter sold plant assets to Seward at a gain of $1,000 on January 1, 2018. Remaining life of the plant assets at the date of sale to Seward was 5 years.
Present the consolidated financial statements for 2020, in good form.
Porter Dr (Cr) | Seward Dr (Cr) | Consol Dr (Cr) | |
Current assets | $ 16,000 | $ 6,600 | ? |
Plant assets, net | 124,000 | 72,000 | ? |
Investment in Seward | 65,225 | -- | ? |
Identifiable intangibles | -- | -- | |
Goodwill | -- | -- | ? |
Liabilities | (161,025) | (55,000) | ? |
Capital stock | (14,000) | (2,000) | ? |
Retained earnings, beg. | (30,000) | (16,500) | ? |
AOCI, beg. | (2,000) | (1,500) | ? |
Sales revenue | (95,000) | (35,000) | ? |
Equity in NI of Seward | (400) | -- | ? |
Equity in OCI of Seward | (100) | -- | ? |
Cost of goods sold | 62,000 | 23,000 | ? |
Operating expenses | 35,000 | 8,500 | ? |
OC(I)L | 300 | (100) | ? |
Total | $ 0 | $ 0 | ? |
Advanced Accounting
ISBN: 978-1934319307
2nd edition
Authors: Susan S. Hamlen, Ronald J. Huefner, James A. Largay III