On January 1, 20X9, Zigma Company acquired 100 percent of Standard Company's common shares at underlying...

   

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On January 1, 20X9, Zigma Company acquired 100 percent of Standard Company's common shares at underlying book value. Zigma uses the equity method in accounting for its ownership of Standard. On December 31, 20X9, the trial balances of the two companies are as follows: Current Assets Depreciable Assets Investment in Standard Co. Other Expenses Depreciation Expense Dividends Declared Accumulated Depreciation Current Liabilities Long-Term Debt Common Stock Retained Earnings Sales Income from Standard Co. Total Zigma Co Debit $238,000 300,000 100,000 90,000 30,000 32,000 $790,000 Record the initial investment in Standard Co. Credit Standard Co. Credit Record Zigma Co.'s 100% share of Standard Co.'s 20X9 income Debit $95,000 170,000 $120,000 50,000 120,000 100,000 175,000 200,000 25,000 $790,000 $362,000 $362,000 Record Zigma Co.'s 100% share of Standard Co.'s 20X9 dividend 70,000 17,000 10,000 Required: a. Prepare the journal entries on Zigma's books for the acquisition of Standard on January 1, 20x9 as well as any normal equity method entry (ies) related to the investment in Standard Company during 20x9. b. Prepare the consolidation entries needed as of December 31, 20X9, to complete a consolidation worksheet. c. Prepare a three-part consolidation worksheet as of December 31, 20X9. a. Equity Method Entries on Zigma Co.'s Books: $ 85,000 30,000 50,000 50,000 35,000 112,000 Acquisition Price Net Income Ending Balance Beginning Balance Ending Balance Investment in Standard Co. b. Elimination Entries: Common Stock Dividends To eliminate the Investment account Income from Standard Co. Retained Earnings Net Income Ending Balance Beg Balance Post-Closing Balance To reverse equity method entries made during the year and return Investment account to the beginning of year balance c. Consolidation Worksheet: Income Statement Sales Less: Depreciation Expense Less: Other Expenses Income from Standard Co. Net Income Statement of Retained Earnings Beginning Balance Net Income Less: Dividends Declared Ending Balance Balance Sheet Current Assets Depreciable Assets Less: Accumulated Depreciation Investment in Standard Co. Total Assets Current Liabilities Long-Term Debt Common Stock Retained Earnings Total Liabilities & Equity Zigma Co. 200,000 (90,000) (30,000) 25,000 105,000 175,000 (32,000) 238,000 300,000 (120,000) 100,000 518,000 50,000 120,000 100,000 518,000 Standard Co. 112,000 (70,000) (17,000) 25,000 35,000 (10,000) 95,000 170,000 (85,000) 180,000 30,000 50,000 50,000 180,000 Elimination Entries DR CR Consolidated On January 1, 20X9, Zigma Company acquired 100 percent of Standard Company's common shares at underlying book value. Zigma uses the equity method in accounting for its ownership of Standard. On December 31, 20X9, the trial balances of the two companies are as follows: Current Assets Depreciable Assets Investment in Standard Co. Other Expenses Depreciation Expense Dividends Declared Accumulated Depreciation Current Liabilities Long-Term Debt Common Stock Retained Earnings Sales Income from Standard Co. Total Zigma Co Debit $238,000 300,000 100,000 90,000 30,000 32,000 $790,000 Record the initial investment in Standard Co. Credit Standard Co. Credit Record Zigma Co.'s 100% share of Standard Co.'s 20X9 income Debit $95,000 170,000 $120,000 50,000 120,000 100,000 175,000 200,000 25,000 $790,000 $362,000 $362,000 Record Zigma Co.'s 100% share of Standard Co.'s 20X9 dividend 70,000 17,000 10,000 Required: a. Prepare the journal entries on Zigma's books for the acquisition of Standard on January 1, 20x9 as well as any normal equity method entry (ies) related to the investment in Standard Company during 20x9. b. Prepare the consolidation entries needed as of December 31, 20X9, to complete a consolidation worksheet. c. Prepare a three-part consolidation worksheet as of December 31, 20X9. a. Equity Method Entries on Zigma Co.'s Books: $ 85,000 30,000 50,000 50,000 35,000 112,000 Acquisition Price Net Income Ending Balance Beginning Balance Ending Balance Investment in Standard Co. b. Elimination Entries: Common Stock Dividends To eliminate the Investment account Income from Standard Co. Retained Earnings Net Income Ending Balance Beg Balance Post-Closing Balance To reverse equity method entries made during the year and return Investment account to the beginning of year balance c. Consolidation Worksheet: Income Statement Sales Less: Depreciation Expense Less: Other Expenses Income from Standard Co. Net Income Statement of Retained Earnings Beginning Balance Net Income Less: Dividends Declared Ending Balance Balance Sheet Current Assets Depreciable Assets Less: Accumulated Depreciation Investment in Standard Co. Total Assets Current Liabilities Long-Term Debt Common Stock Retained Earnings Total Liabilities & Equity Zigma Co. 200,000 (90,000) (30,000) 25,000 105,000 175,000 (32,000) 238,000 300,000 (120,000) 100,000 518,000 50,000 120,000 100,000 518,000 Standard Co. 112,000 (70,000) (17,000) 25,000 35,000 (10,000) 95,000 170,000 (85,000) 180,000 30,000 50,000 50,000 180,000 Elimination Entries DR CR Consolidated

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