X Co. acquired 80% of Y Co. on January 1, Year 3, when Y Co. had...

  
 
 

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X Co. acquired 80% of Y Co. on January 1, Year 3, when Y Co. had common shares of $210,000 and retained earnings of $81,000. The acquisition differential was allocated as follows on this date: Inventory Equipment (15-year life) Total acquisition differential $ 71,000 61,500 $132,500 Since this date the following events have occurred: Year 3 • Y Co. reported a net income of $151,000 and paid dividends of $36,000. • On July 3, X Co. sold land to Y Co. for $134,000. This land was carried in the records of X Co. at $86,000. • On December 31, Year 3, the inventory of X Co. contained an intercompany profit of $41,000. • X Co. reported a net income of $510,000 from its own operations. Required: Assume a 40% tax rate. (a) Prepare X Co.'s equity method journal entries subsequent to the date of acquisition for each of Years 3 and 4. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Input all values as positive numbers.) Year 3 View transaction list Journal entry worksheet A B S.No 1 с Record dividend received from Y Co. Note: Enter debits before credits. Record entry DE General Journal Clear entry Debit Credit View general journal > Journal entry worksheet < A B S.No 2 C Record share in net income of Y Co. Note: Enter debits before credits. Record entry DE General Journal Clear entry Debit Credit View general journal > Journal entry worksheet A B < с Note: Enter debits before credits. S.No 3 Record entry to eliminate profit on intercompany inventory transfer. Record entry D E General Journal Clear entry Debit Credit View general journal > Journal entry worksheet <ABC D Record entry to eliminate gain/loss on intercompany tranfer of land. Note: Enter debits before credits. S.No 4 E Record entry General Journal Clear entry Debit Credit View general journal > Journal entry worksheet <A B C D Record entry to amortize acquisition differential. Note: Enter debits before credits. S.No 5 E Record entry General Journal Clear entry Debit Credit View general journal > X Co. acquired 80% of Y Co. on January 1, Year 3, when Y Co. had common shares of $210,000 and retained earnings of $81,000. The acquisition differential was allocated as follows on this date: Inventory Equipment (15-year life) Total acquisition differential $ 71,000 61,500 $132,500 Since this date the following events have occurred: Year 3 • Y Co. reported a net income of $151,000 and paid dividends of $36,000. • On July 3, X Co. sold land to Y Co. for $134,000. This land was carried in the records of X Co. at $86,000. • On December 31, Year 3, the inventory of X Co. contained an intercompany profit of $41,000. • X Co. reported a net income of $510,000 from its own operations. Required: Assume a 40% tax rate. (a) Prepare X Co.'s equity method journal entries subsequent to the date of acquisition for each of Years 3 and 4. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Input all values as positive numbers.) Year 3 View transaction list Journal entry worksheet A B S.No 1 с Record dividend received from Y Co. Note: Enter debits before credits. Record entry DE General Journal Clear entry Debit Credit View general journal > Journal entry worksheet < A B S.No 2 C Record share in net income of Y Co. Note: Enter debits before credits. Record entry DE General Journal Clear entry Debit Credit View general journal > Journal entry worksheet A B < с Note: Enter debits before credits. S.No 3 Record entry to eliminate profit on intercompany inventory transfer. Record entry D E General Journal Clear entry Debit Credit View general journal > Journal entry worksheet <ABC D Record entry to eliminate gain/loss on intercompany tranfer of land. Note: Enter debits before credits. S.No 4 E Record entry General Journal Clear entry Debit Credit View general journal > Journal entry worksheet <A B C D Record entry to amortize acquisition differential. Note: Enter debits before credits. S.No 5 E Record entry General Journal Clear entry Debit Credit View general journal >

Answer rating: 100% (QA)

Computation of Net Income Xs Net Income Dividends Received 36000 x 80 Separate Income of Parent Ys N... View the full answer