Porter Company purchased 60 percent ownership of Temple Corporation on January 1, 20X1, at underlying book value.
Question:
Porter Company purchased 60 percent ownership of Temple Corporation on January 1, 20X1, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 40 percent of Temple's book value. On January 1, 20X1, Porter sold $80,000 par value, 8 percent, five-year bonds directly to Temple when the market interest rate was 7 percent. The bonds pay interest annually on December 31. Porter uses the fully adjusted equity method in accounting for its ownership of Temple. On December 31, 20X2, the trial balances of the two companies are as follows:
Required
a. Record the journal entry or entries for 20X2 on Porter's books related to its investment in Temple.
b. Record the journal entry or entries for 20X2 on Porter's books related to its bonds payable.
c. Record the journal entry or entries for 20X2 on Temple's books related to its investment in Porter’s bonds.
d. Prepare the elimination entries needed to complete a consolidated worksheet for 20X2.
e. Prepare a three-part consolidated worksheet for 20X2.
Porter Company Temple Corporation Item Debit Credit Debit Credit Cash & Accounts Receivable 81,480 Inventory Buildings & Equipment Investment in Temple $38,720 65,000 300,000 120,000 500,000 Corporation Stock 101,772 Company Bonds Cost of Goods Sold Depreciation Expense Interest Expense Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Bond Premium Common Stock Retained Earnings Sales Interest Income Income from Temple Corp Total 99,800 25,000 5,790 40,000 82,100 61,000 15,000 14,000 10,000 $175,000 68,800 80,000 1,200 200,000 230,068 200,000 75,000 41,200 200,000 100,000 49,830 114,000 5,790 17,874 $973,842 $973,842 $585,820 $585,820
Step by Step Answer:
a Entries recorded by Porter on its investment in Temple Cash 6000 Investment in Temple Corporation ...View the full answer
Advanced Financial Accounting
ISBN: 978-0078025624
10th edition
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker
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A journal entry is an act of keeping or making records of any transactions either economic or non-economic. Transactions are listed in an accounting journal that shows a company\'s debit and credit balances. The journal entry can consist of several recordings, each of which is either a debit or a credit
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