The individual financial statements for Patterson Company and Shapiro Company for the year ending December 31,...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
The individual financial statements for Patterson Company and Shapiro Company for the year ending December 31, 2023, follow. Patterson acquired a 60 percent interest in Shapiro on January 1, 2020, in exchange for various considerations totaling $570,000. At the acquisition date, the fair value of the noncontrolling interest was $380,000 and Shapiro's book value was $730,000. Shapiro had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $220,000. This intangible asset is being amortized over 20 years. Patterson uses the equity method to maintain its Investment in Shapiro account. Shapiro regularly transfers inventory to Patterson. In 2022, it shipped inventory costing $100,000 to Patterson at a price of $150,000. During 2023, intra-entity shipments totaled $200,000, although the original cost to Shapiro was only $140,000. In each of these years, 30 percent of the merchandise was not resold to outside parties until the period following the transfer. Patterson owed Shapiro $40,000 at the end of 2023 (i.e., intra-entity payables). Accounts Sales Patterson (800,000) Shapiro (500,000) Cost of goods sold 500,000 300,000 Operating expenses 100,000 60,000 Equity in earnings of Shapiro (75,600) Net income (275,600) (140,000) Retained earnings, 1/1 (1,067,000) (575,000) Net income (above) (275,600) (140,000) Dividends declared 115,000 60,000 Retained earnings, 12/31 (1,227,600) (655,000) Cash 177,000 90,000 Accounts receivable 356,000 410,000 Inventory 414,800 320,000 Investment in Shapiro 733,800 Land 140,000 390,000 Buildings and equipment (net) 496,000 300,000 Total assets 2,317,600 1,510,000 Liabilities (480,000) (445,000) Common stock (610,000) (320,000) Additional paid-in capital (90,000) Retained earnings, 12/31 (1,227,600) (655,000) Total liabilities and equity (2,317,600) (1,510,000) Credit balances are in parentheses. Required: 1. (10 points) Show how Patterson determined its Investment in Shapiro account as of December 31, 2023. The balance of this account as of January 1, 2023 was $694,200. Prepare a t- account and show postings to the account during 2023. 2. (36 points) Complete the provided worksheet (in Excel) to consolidate the separate 2023 financial statements of Patterson and Shapiro and do the following: Prepare consolidation entries (Hint: There are nine consolidation entries.) Determine net income to the NCI and Patterson Determine the ending balance of the NCI account Determine consolidation totals 3. (4 points) What would be the ending balance of Investment in Shapiro as of December 31, 2023 if the inventory transfers were downstream (from Patterson to Shapiro) and the beginning balance of Investment in Shapiro were $694,200? Patterson and Shapiro Consolidation Worksheet Year Ending December 31, 2023 Consolidation Entries Credit Accounts Sales Cost of goods sold Operating expenses Patterson -800,000 500,000 Shapiro -500,000 Debit 300,000 100,000 60,000 Equity in earnings f Shapiro -75,600 Separate company net net income -275,600 -140.000 Consolidated net income Net income to NCI Net income! to Patterson Company RE, 1/1-Patterson -1,067,000 RE, 1/1-Shapiro Net income (above) Dividends declared -275,600 115,000 Retained earnings, 12/31 -1,227,600 -575,000 -140.000 60,000 -655,000 Cash 177,000 90,000 Accounts receivable 356,000 410,000 Inventory 414,800 320,000 Investment in Shapiro 733,800 = 140.000 390.000 Buildings and equipment (net) 496,000 300,000 Customer list Total assets Liabilities Common stock 2,317,600 -480,000 -610,000 Additional paid-in capital Retained earnings, 12/31 -1,227,600 1,510,000 -445,000 -320,000 -90,000 -655,000 NCI in Shapiro, 1/1 NCI in Shapiro, 12/31 Total liabilities and equity -2,317,600 -1,510,000 Noncontrolling Consolidated Interest Totals Note: Use parentheses to indicate credit balances if a single column is used to show debit/credit balances. The individual financial statements for Patterson Company and Shapiro Company for the year ending December 31, 2023, follow. Patterson acquired a 60 percent interest in Shapiro on January 1, 2020, in exchange for various considerations totaling $570,000. At the acquisition date, the fair value of the noncontrolling interest was $380,000 and Shapiro's book value was $730,000. Shapiro had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $220,000. This intangible asset is being amortized over 20 years. Patterson uses the equity method to maintain its Investment in Shapiro account. Shapiro regularly transfers inventory to Patterson. In 2022, it shipped inventory costing $100,000 to Patterson at a price of $150,000. During 2023, intra-entity shipments totaled $200,000, although the original cost to Shapiro was only $140,000. In each of these years, 30 percent of the merchandise was not resold to outside parties until the period following the transfer. Patterson owed Shapiro $40,000 at the end of 2023 (i.e., intra-entity payables). Accounts Sales Patterson (800,000) Shapiro (500,000) Cost of goods sold 500,000 300,000 Operating expenses 100,000 60,000 Equity in earnings of Shapiro (75,600) Net income (275,600) (140,000) Retained earnings, 1/1 (1,067,000) (575,000) Net income (above) (275,600) (140,000) Dividends declared 115,000 60,000 Retained earnings, 12/31 (1,227,600) (655,000) Cash 177,000 90,000 Accounts receivable 356,000 410,000 Inventory 414,800 320,000 Investment in Shapiro 733,800 Land 140,000 390,000 Buildings and equipment (net) 496,000 300,000 Total assets 2,317,600 1,510,000 Liabilities (480,000) (445,000) Common stock (610,000) (320,000) Additional paid-in capital (90,000) Retained earnings, 12/31 (1,227,600) (655,000) Total liabilities and equity (2,317,600) (1,510,000) Credit balances are in parentheses. Required: 1. (10 points) Show how Patterson determined its Investment in Shapiro account as of December 31, 2023. The balance of this account as of January 1, 2023 was $694,200. Prepare a t- account and show postings to the account during 2023. 2. (36 points) Complete the provided worksheet (in Excel) to consolidate the separate 2023 financial statements of Patterson and Shapiro and do the following: Prepare consolidation entries (Hint: There are nine consolidation entries.) Determine net income to the NCI and Patterson Determine the ending balance of the NCI account Determine consolidation totals 3. (4 points) What would be the ending balance of Investment in Shapiro as of December 31, 2023 if the inventory transfers were downstream (from Patterson to Shapiro) and the beginning balance of Investment in Shapiro were $694,200? Patterson and Shapiro Consolidation Worksheet Year Ending December 31, 2023 Consolidation Entries Credit Accounts Sales Cost of goods sold Operating expenses Patterson -800,000 500,000 Shapiro -500,000 Debit 300,000 100,000 60,000 Equity in earnings f Shapiro -75,600 Separate company net net income -275,600 -140.000 Consolidated net income Net income to NCI Net income! to Patterson Company RE, 1/1-Patterson -1,067,000 RE, 1/1-Shapiro Net income (above) Dividends declared -275,600 115,000 Retained earnings, 12/31 -1,227,600 -575,000 -140.000 60,000 -655,000 Cash 177,000 90,000 Accounts receivable 356,000 410,000 Inventory 414,800 320,000 Investment in Shapiro 733,800 = 140.000 390.000 Buildings and equipment (net) 496,000 300,000 Customer list Total assets Liabilities Common stock 2,317,600 -480,000 -610,000 Additional paid-in capital Retained earnings, 12/31 -1,227,600 1,510,000 -445,000 -320,000 -90,000 -655,000 NCI in Shapiro, 1/1 NCI in Shapiro, 12/31 Total liabilities and equity -2,317,600 -1,510,000 Noncontrolling Consolidated Interest Totals Note: Use parentheses to indicate credit balances if a single column is used to show debit/credit balances.
Expert Answer:
Related Book For
Advanced Accounting
ISBN: 9781260247824
14th Edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik
Posted Date:
Students also viewed these accounting questions
-
You are short a put option on Oracle stock with an exercise price of $20 that expires today. Plot the value of this option as a function of the stock price. SOLUTION PLAN Again, the strike price is...
-
The individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2021, follow. Gibson acquired a 60 percent interest in Keller on January 1, 2020, in...
-
The director of cost management for Odessa Company uses a statistical control chart to help management determine when to investigate variances. The critical value is 1 standard deviation. The company...
-
In teams, select a public company that interests you. Obtain the company's most recent annual report on Form 10-K. The Form 10-K is a company's annually required filing with the Securities and...
-
Martha's Grain Shop recorded the following purchases and sales of fertilizer during the past year: Assume that Martha's Grain Shop sold all of the June 15 purchase and 100 cases each from the January...
-
Due to a nationwide recession, PC Worlds merchandise inventory is gathering dust. It is now December 31, 2010, and the \($162,000\) that PC World paid for its ending inventory is \($14,000\) higher...
-
George Hunting Lodge has the following internal control procedures over cash disbursements. Identify the internal control principle that is applicable to each procedure. 1. Company checks are...
-
Please answer any four (out of five) questions. To get full marks in a quantitative question you must show all calculations and formula used. Question 1: 20 marks (a)Discuss how invoicing and lead...
-
Write a brief note on Resolute Marine Energy: Power in Waves
-
How has technology influenced the sports marketing industry? Discuss how out- of- market technology benefits sports spectators.
-
How and why are financial traders driven by social influences and why might these social influences be more destabilizing when the information to which traders have access is poor and uncertainty is...
-
Define competition. What are the different types of competition?
-
What is environmental scanning? Why is environmental scanning so important? Who conducts the environmental scan, and how is one conducted?
-
Explain how Minskys financial fragility hypothesis captures the interaction of emotional and psychological influences and their impacts on financial structure. What are the potential consequences for...
-
A is an m n matrix of rank r. Suppose there are column vectors b for which Ax = b has no solution. What are all the inequalities (< or ) that must be true between m, n, and r? You can write two...
-
When is the indirect pattern appropriate, and what are the benefits of using it?
-
What accounting is made for professional fees incurred during a bankruptcy reorganization? a. They must be expensed immediately. b. They must be capitalized and written off over 180 months or less....
-
Historically, what factors contributed to the diversity of accounting systems worldwide?
-
What is a partnership dissolution? Does dissolution automatically necessitate the cessation of business and the liquidation of partnership assets?
-
When is an employee able to participate in a SEP? A. In the current year, if employee attains age 18 by December B. If the employee performed services for the employer in at least 3 of any 5...
-
If a married couple occupied a principal residence for two out of the past five years and then rented it for three of those five years, are they still able to obtain Section 121 exclusion? A. Yes,...
-
Bob Newton is a key employee of Information Solutions, Inc. (IS). Bob has been with IS since 1984 and is about to retire. IS has a very large key employee life insurance contract on Bob, and now that...
Study smarter with the SolutionInn App