Exercise 4 (LO 3) Sale of interest, control maintained. Carpenter Company has the following balance sheet...
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Exercise 4 (LO 3) Sale of interest, control maintained. Carpenter Company has the following balance sheet on December 31, 2015: Assets Liabilities and Equity Current assets $100,000 Liabilities $100,000 Investment in Hinckley Company Equity: 200,000 Property, plant, and Common stock ($10 par) $500,000 Retained earnings 100,000 600,000 *** equipment (net) 400,000 Total assets $700,000 Total liabilities and equity $700,000 The investment in Hinckley Company account reflects the original cost of an 80% interest (40,000 shares) purchased on January 1, 2012. On the date of the purchase, Hinckley stockholders' equity has a book value of $100,000. Hinckley's other book values approximate fair values, except for a machine with a 5-year remaining life that is undervalued by $100,000. Any additional excess is attributed to goodwill. A review of Hinckley's past financial statements reveals the following: Income Dividends Paid $ 30,000 $ 10,000 2012 2013 40,000 10,000 2014.. 50,000 10,000 2015.. 60,000 10,000 Total $180,000 $40,000 Carpenter sells 10,000 shares of Hinckley common stock on January 1, 2016, for $90,000. REQUIREMENTS 1. As of December 31, 2015, under the sophisticated equity method, what is the ending balance of the "Investment in Hinckley Company" account? Prepare the necessary general journal entries on Carpenter's books to account accurately for the sale of the 10,000 Hinckley shares. 2. Exercise 4 (LO 3) Sale of interest, control maintained. Carpenter Company has the following balance sheet on December 31, 2015: Assets Liabilities and Equity Current assets $100,000 Liabilities $100,000 Investment in Hinckley Company Equity: 200,000 Property, plant, and Common stock ($10 par) $500,000 Retained earnings 100,000 600,000 *** equipment (net) 400,000 Total assets $700,000 Total liabilities and equity $700,000 The investment in Hinckley Company account reflects the original cost of an 80% interest (40,000 shares) purchased on January 1, 2012. On the date of the purchase, Hinckley stockholders' equity has a book value of $100,000. Hinckley's other book values approximate fair values, except for a machine with a 5-year remaining life that is undervalued by $100,000. Any additional excess is attributed to goodwill. A review of Hinckley's past financial statements reveals the following: Income Dividends Paid $ 30,000 $ 10,000 2012 2013 40,000 10,000 2014.. 50,000 10,000 2015.. 60,000 10,000 Total $180,000 $40,000 Carpenter sells 10,000 shares of Hinckley common stock on January 1, 2016, for $90,000. REQUIREMENTS 1. As of December 31, 2015, under the sophisticated equity method, what is the ending balance of the "Investment in Hinckley Company" account? Prepare the necessary general journal entries on Carpenter's books to account accurately for the sale of the 10,000 Hinckley shares. 2.
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Balance of Investment in Hinckley Cost 200000 income 2012 2... View the full answer
Related Book For
Advanced Accounting
ISBN: 978-0538480284
11th edition
Authors: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Posted Date:
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