Background:

• The student recently accepted the controller position for Java the Hut, a regional coffee chain.
• The owner informs you that a complete financial statement package will be required as part of a new bank loan compliance requirements ("covenants").
• Prior to your arrival, the company had one accountant and relied heavily on the auditors in the preparation of financial statements. With the new controller position, the expectation is that you will assume the preparation of financial statements.
• On your first day of work on April 1, 2018, the Java the Hut accountant informs you that there were a number of transactions in the first quarter of 2018 that she was unsure of the appropriate accounting.Consequently, she recorded the cash activity in the Other Assets - Holding account as a temporary holding account. The good news is that the Java the Hut accountant maintained excellent details of the various transactions and has a series of supporting schedules for you.
• The project reflects a "real-life" challenge in that you are responsible for accounting issues months following the actual transaction. In this case, an acquisition was completed on 1/1, and you are now responsible for acquisition accounting consolidated financial statements for the first three months (first quarter of 2018).

Project Requirements:

Objective #1: Adjust Other Assets - Holding account balance on Java the Hut's ledgers.

1. Prepare the appropriate journal entries to recognize the first quarter transactions currently reported in Other Assets - Holding in the balance sheet of Java the Hut (Parent Company) outlined in Schedule 1.
   1. The goal of the journal entries is to eliminate the balance in the Other Asset - Holding account with new accounts to reflect the appropriate accounting recognition.

7 _____________________- Schedule 1 Java the Hut Account Analysis Other Assets - Holding Account Analysis as of 3/31/18 _a_'_. Acquisition of New Castle Coffee on 1/1/18 Stock acquisition of 1,000 shares outstanding (Par Value = $1.00) Percent of shares outstanding 100% Purchase price at settlement 5 150,000 Acquisition Expense I S 12,000 Debt set-up costs (revolving credit agreement) S 6,000 Acquisition of New Castle Coffee on 1/1/18 S 168,000 Equity investment in Newark Coffee Activity K Purchase of 40% interest of shares outstanding 1/1/18 5 44,000 Dividends received on 3/1/18 (in cash) 5 (2,000) Equity investment in Newark Coffee Activity 5 42,000 Other Assets - Holding Account Analysis as of 3/31/18 gm Adjusting Entries: Investment in New Castle Coffee $ 168,000 Acquisition Expense $ 12,000 Debt Setup Fees $ 6,000 Other Assets - Holding $ 210,000 Record Purchase of New Castle Coffee stock (100%) Objective #1: Eliminated Other Assets - Holding Account Investment in Newark Coffee $ 42,000 Other Assets - Holding Record Purchase of Newark Coffee stock (40%) Other Assets - Holding 18 Investment in Newark Coffee 19 Record dividends from Newark Coffee using equity method (40%) 20