Background:

• You 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).

Objective #4: Recognize subsidiary earnings on Java the Hut (Parent) ledger.

1. On Java's books, prepare the appropriate journal entries to recognize the first quarter accounting for Newark Coffee earnings (Schedule 6).

Schedule 6:

Schedule 6 Intercompany Transactions Intercompany Sales - Q1 2018 Java the Hut coffee bean sales to New Castle Coffee $ 15,500 Intercompany Inventory (on hand on 3/31/18) Coffee bean inventory from Java the Hut sales to New Castle Coffee at 3/31/18 $ 3,500 Equity Investment - Newark Coffee Earnings Equity reported by Newark Coffee for the first quarter of 2018 were $ 10,250