Option #1: Prepare Journal Entries and Consolidation Entries Related to an Affiliate's Debt On January 1, 20X7, P Company acquired 60 percent of the outstanding common stock of S Company at the book value of the shares acquired. On that date, the fair value of noncontrolling interest was equal to 40 percent of book value of S. At the time of purchase, S had common stock of $1,000,000 outstanding and retained earnings of $800,000.
 
On December 31, 20X7, P purchased 50 percent of S's bonds outstanding which were originally issued on January 1, 20X4, at 99. The total bond issue has a face value of $600,000, pays 10 percent interest annually, and has a 10-year maturity. Any premium or discount is amortized using the effective interest method. P paid $306,000 for its investment in S's bonds and intends to hold the bonds until maturity.
 
Income and dividends for P and S for 20X7 and 20X8 are as follows:
 
 
Assume P accounts for its investment in S stock using the cost method.
 
Required: 1. Present the worksheet elimination entries necessary to prepare consolidated financial statements  for 20X7. 2. Present the worksheet elimination entries necessary to prepare consolidated financial statements for 20X8.
 
Use Excel formulas to make or evidence each of your calculations of all dollar amounts. Do not enter any dollar amounts directly, unless it is unavoidable for obvious reasons. Use the tab function at the bottom of the Excel file to complete the assignment.

Transcribed Image Text:

Operating Income Dividends Dividends Net Income 2$ 20X7 $ 1,600,000 1,200,000 $ 400,000 $ 300,000 600,000 20X8 400,000 1,000,000 300,000 Assume P accounts for its investment in S stock using the cost method. Operating Income Dividends Dividends Net Income 2$ 20X7 $ 1,600,000 1,200,000 $ 400,000 $ 300,000 600,000 20X8 400,000 1,000,000 300,000 Assume P accounts for its investment in S stock using the cost method.

Answer rating: 100% (QA)

These chart are best suit for the required solution of the problem These was known as Book Value Calculations Deferred Loss Calculations And Basic eli... View the full answer