January 1, 2019, Poise Co. bought 70% ownership of Serenity Co. amounting to Rp. 245,000,000. Serenity Co.'s Equity Structure at the time of the merger, it consisted of Capital Stock of Rp. 100,000,000, Other Contributed Capital of Rp. 50,000,000 and Retained Earnings of Rp. 150,000,000. The resulting difference is allocated to trade receivables that are undervalued by Rp. 5,000,000, machines that are overvalued by Rp. 30,000,000, equipment which is undervalued by Rp. 20,000,000 and trade payables which are overvalued by Rp. 15,000,000. The difference is allocated to the patent which is amortized over 40 years. It is known that the useful lives of machinery and equipment are 6 years and 4 years. Trade payables are repaid in the year of acquisition. Accounts receivable will be paid in 2020.

The following will be presented the Financial Statements of Poise Co. and its subsidiaries as of December 31, 2020 (In Rupiah):

Description	Poise Co.	Serenity Co.
Income Statement
Sales	549,800,000	425,000,000
Equity in Subsidiary Income	71,900,000	-
Cost of Sales	(420,000,000)	(270,000,000)
Operating Expense	(81,700,000)	(55,000,000)
Net Income	120,000,000	100,000,000
Retained Earnings Statement
Retained Earnings, January 1	200,000,000	180,000,000
Net Income	120,000,000	100,000,000
Dividend	(50,000,000)	(55,000,000)
Retained Earnings, December 31	270,000,000	225,000,000
Balance Sheets
Cash	98,700,000	150,000,000
Account Receivable – net	50,000,000	45,000,000
Inventories	30,000,000	25,000,000
Investment in Serenity Co.	286,100,000	-
Land	50,000,000	40,000,000
Machine – net	105,000,000	100,000,000
Equipment – net	80,000,000	75,000,000
TOTAL ASSETS	699,800,000	435,000,000
Account Payable	104,800,000	40,000,000
Notes Payable	55,000,000	15,000,000
Other Liabilities	70,000,000	5,000,000
Capital Stock	125,000,000	100,000,000
Other Contributed Capital	75,000,000	50,000,000
Retained Earnings	270,000,000	225,000,000
TOTAL EQUITIES	699,800,000	435,000,000

Additional information:

1. In 2019, Poise Co. purchase supplies from Serenity Co. at a price of Rp. 60,000,000. The profit earned is 20% of the cost of goods. At the end of 2019, there were 30% of inventories that had not been sold out.

2. In 2020, Poise Co. sells inventory to Serenity Co. amounting to Rp. 40,000,000 which the basic price is Rp. 60,000,000. During 2020, Serenity Co. managed to sell 4/5 of the stock. For this purchase, Serenity Co. owed Rp 10,000,000 to Poise Co.

Requested:

1. Make CAD calculations

2. Calculate Equity in Subsidiary Income and Noncontrolling Interest in Income

3. Journalize eliminations (LO3-weighted 20%)

4. Prepare consolidated working paper for 2020 (LO3-weight 30%)

5. If on January 1, 2021 Poise Co disposes of part of its interest in Serenity Co at a selling price that exceeds the book value of its investment, how is the accounting treatment for the resulting difference? Also journalize the sale of interests by Poise Co without writing down the numbers/journals only (LO4-weight 10%).

Answer rating: 100% (QA)

1 CAD Calculations Poise Co Book Value of Investment in Serenity Co 70 x 100000000 50000000 150000000 245000000 Serenity Co Book Value of Assets 10000... View the full answer