Problem 3-2 ( LO 2 ) Equity method adjustments , consolidated worksheet . On January 1 , 20X1 , Peres Company purchased 80 % of the common stock of Soil Company for $ 308,000 . On this date , Soll had common stock , other paid - in capital , and retained earnings of $ 50,000 , $ 100,000 , and $ 150,000 , respectively . Net income and dividends for two years for gested can easily compare the entries. CU Soll Company were as follows: 20X1 20x2 Net income Dividends. $60,000 20,000 $90,000 30,000 On January 1, 20x1, the only tangible assets of Soll that were undervalued were inventory and the building. Inventory, for which FIFO is used, was worth $10,000 more than cost. The Cluper 3 CONSOLIDATED STATEMENTS SURQUENT TO ACQUISITION inventory was sold in 20X1. The building, which is worth $25,000 more than book value, has a remaining life of 10 years, and straight-line depreciation is used. The remaining excess of cost over book value is attributable to goodwill. 1. Using this information or the information in the following trial balances, prepare a determi- *** nation and distribution of excess schedule. 2. Peres Company carries the investment in Soll Company under the simple equity method. In general journal form, record the entries that would be made to apply the equity method in 20X1 and 20x2. 3. Compute the balance that should appear in Investment in Soll Company and in Soll Income on December 31, 20X2 (the second year). Fill in these amounts on Peres Company's trial balance for 20X2 4. Complete a worksheet for consolidated financial statements for 20x2. Include columns for eliminations and adjustments, consolidated income, NCI, controlling retained earnings, and balance sheet Soll Company 50,000 180,000 Peres Company 100,000 148,000 Note 1 50,000 350,000 1100,000) 50,000 320,000 160,000) 20,000 (120,000 (40,000) (100,000 Inventory, December 31 Other Current Assets Investment in Soll Company Land Buildings and Equipment Accumulated Depreciation Goodwill Other Intangibles. Current Liabilities Bonds Payable Other Long-Term Liabilities Common Stock, P Company Other Paid In Capital, P Company Retained Earnings, P Company Common Stock, S Company Other Paid In Capital, S Company Retained Earnings, S Company. Net Sales.... Cost of Goods Sold Operating Expenses Soll Income Dividends Declared, P Company Dividends Declared, S Company Note 1: To be calculated. (200,000) (200,000) (100,000) (214,000) (50,000) (100,000) 1190,000) (450,000) 260,000 100,000 (520,000) 300,000 120,000 Note 1 50,000 30,000 Problem 3-2 ( LO 2 ) Equity method adjustments , consolidated worksheet . On January 1 , 20X1 , Peres Company purchased 80 % of the common stock of Soil Company for $ 308,000 . On this date , Soll had common stock , other paid - in capital , and retained earnings of $ 50,000 , $ 100,000 , and $ 150,000 , respectively . Net income and dividends for two years for gested can easily compare the entries. CU Soll Company were as follows: 20X1 20x2 Net income Dividends. $60,000 20,000 $90,000 30,000 On January 1, 20x1, the only tangible assets of Soll that were undervalued were inventory and the building. Inventory, for which FIFO is used, was worth $10,000 more than cost. The Cluper 3 CONSOLIDATED STATEMENTS SURQUENT TO ACQUISITION inventory was sold in 20X1. The building, which is worth $25,000 more than book value, has a remaining life of 10 years, and straight-line depreciation is used. The remaining excess of cost over book value is attributable to goodwill. 1. Using this information or the information in the following trial balances, prepare a determi- *** nation and distribution of excess schedule. 2. Peres Company carries the investment in Soll Company under the simple equity method. In general journal form, record the entries that would be made to apply the equity method in 20X1 and 20x2. 3. Compute the balance that should appear in Investment in Soll Company and in Soll Income on December 31, 20X2 (the second year). Fill in these amounts on Peres Company's trial balance for 20X2 4. Complete a worksheet for consolidated financial statements for 20x2. Include columns for eliminations and adjustments, consolidated income, NCI, controlling retained earnings, and balance sheet Soll Company 50,000 180,000 Peres Company 100,000 148,000 Note 1 50,000 350,000 1100,000) 50,000 320,000 160,000) 20,000 (120,000 (40,000) (100,000 Inventory, December 31 Other Current Assets Investment in Soll Company Land Buildings and Equipment Accumulated Depreciation Goodwill Other Intangibles. Current Liabilities Bonds Payable Other Long-Term Liabilities Common Stock, P Company Other Paid In Capital, P Company Retained Earnings, P Company Common Stock, S Company Other Paid In Capital, S Company Retained Earnings, S Company. Net Sales.... Cost of Goods Sold Operating Expenses Soll Income Dividends Declared, P Company Dividends Declared, S Company Note 1: To be calculated. (200,000) (200,000) (100,000) (214,000) (50,000) (100,000) 1190,000) (450,000) 260,000 100,000 (520,000) 300,000 120,000 Note 1 50,000 30,000