For internal reporting purposes, Liepewan Corporation now uses the initial value method to account for its investment
Question:
For internal reporting purposes, Liepewan Corporation now uses the initial value method to account for its investment in Mertenika in Year 5.
Using the information on income and dividends in the table below complete the consolidated financial statements for Liepewan Corporation on the provided worksheet for the year ending 12/31/Year 5.
Income, dividends, and retained earnings figures for Mertenika Corporation for the years 1 through 5 are shown below.
Mertenika Dividends Increase in Ending
Year Net Income Paid Book Value Retained Earnings
1 700,000 400,000 300,000 2,000,000
2 750,000 400,000 350,000 2,350,000
3 800,000 450,000 350,000 2,700,000
4 775,000 475,000 300,000 3,000,000
5 800,000 500,000 300,000 3,300,000
Totals- $3,825,000 2,225,000 1,600,000
Consolidation Worksheet 12/31/Year 5 Initial Value
Accounts | Liepewan | Mertenika | Debit | Credit | Noncontrol Int | Totals |
Revenues | (6,000,000) | (3,200,000) | ||||
Expenses | 4,000,000 | 2,000,000 | ||||
Depreciatn & Amrtizatn Expnse | 800,000 | 400,000 | ||||
Investee Income | (300,000) | 0 | ||||
Net Income | (1,500,000) | (800,000) | ||||
Noncontrolling Int NI | ||||||
Retained Earnings 1/1 | (10,200,000) | (3,000,000) | ||||
Net Income | (1,500,000) | (800,000) | ||||
Dividends | 900,000 | 500,000 | ||||
Retained earnings 12/31 | (10,800,000) | (3,300,000) | ||||
Balance Sheet | ||||||
Current Assets | 1,000,000 | 950,000 | ||||
Investment in Mertenika | 3,600,000 | 0 | ||||
PPE (net) | 7,400,000 | 4,000,000 | ||||
Copyrights | 0 | 0 | ||||
Goodwill | 0 | 0 | ||||
Land | 3,800,000 | 1,000,000 | ||||
Total Assets | 15,800,000 | 5,950,000 | ||||
Accounts Payable | (150,000) | (230,000) | ||||
Notes Payable | (250,000) | (120,000) | ||||
Noncontrol Interest 1/1 | ||||||
Noncontrol Interest 12/31 | ||||||
Common Stock | (100,000) | (300,000) | ||||
Additional Paid-in capital | (4,500,000) | (2,000,000) | ||||
Retained earnings | (10,800,000) | (3,300,000) | ||||
Total liabilities and equity | (15,800,000) | (5,950,000) |
Accounting Principles
ISBN: 978-1119411482
13th edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso