Albert Company has an investment in the voting shares of Prince Ltd. On December 31, Year 5, Prince reported a net income of $860,000 and declared dividends of $200,000. During Year 5, Albert had sales to Prince of $915,000, and
Albert Company has an investment in the voting shares of Prince Ltd. On December 31, Year 5, Prince reported a net income of $860,000 and declared dividends of $200,000.
During Year 5, Albert had sales to Prince of $915,000, and Prince had sales to Albert of $500,000. On December 31, Year 5, the inventory of Albert contained an after-tax intercompany profit of $40,000, and the inventory of Prince contained an after-tax intercompany profit of $72,000.
On January 1, Year 4, Albert sold equipment to Prince and recorded an after- tax profit of $120,000 on the transaction. The equipment had a remaining useful life of five years on this date. Albert uses the equity method to account for its investment in Prince.
Required:
Prepare Albert’s Year 5 equity method journal entries under each of the following two assumptions:
(a) Albert owns 64% of Prince, and Prince is a subsidiary.
(b) Albert owns 30% of Prince, and Prince is a joint venture.
During Year 5, Albert had sales to Prince of $915,000, and Prince had sales to Albert of $500,000. On December 31, Year 5, the inventory of Albert contained an after-tax intercompany profit of $40,000, and the inventory of Prince contained an after-tax intercompany profit of $72,000.
On January 1, Year 4, Albert sold equipment to Prince and recorded an after- tax profit of $120,000 on the transaction. The equipment had a remaining useful life of five years on this date. Albert uses the equity method to account for its investment in Prince.
Required:
Prepare Albert’s Year 5 equity method journal entries under each of the following two assumptions:
(a) Albert owns 64% of Prince, and Prince is a subsidiary.
(b) Albert owns 30% of Prince, and Prince is a joint venture.
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Unrealized profits After tax Closing inventory Prince selling 40 000 Albert selling 72 000 Equipment …View the full answer

Related Book For
Modern Advanced Accounting In Canada
ISBN: 9781259066481
7th Edition
Authors: Hilton Murray, Herauf Darrell
Posted Date: June 08, 2015 08:18:01
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