On
September 1, 2011, Parcel Corporation purchased 80% of the outstanding common stock of
Sack Corporation for $152,000. On that date, Sack’s net book values equaled fair values, and
there was no excess of cost or book value resulting from the purchase. Parcel has been maintaining its investment under the simple equity method.
Over the next three years, the intercompany transactions between the companies were as
follows:
a. On September 1, 2011, Sack sold its 4 year old delivery truck to Parcel for $14,000 in cash.
At that time, Sack had depreciated the truck, which had cost $15,000, to its $5,000 salvage
value. Parcel estimated on the date of the sale that the asset had a remaining useful life of
three years and no salvage value.
b. On September 1, 2012, Parcel sold equipment to Sack for $103,000. Parcel originally paid
$80,000 for the equipment and planned to depreciate it over 20 years, assuming no salvage
value. However, Parcel had the property for only 10 years and carried it at a net book value
of $40,000 on the sale date. Sack will use the equipment for 10 years, at which time Sack
expects no salvage value.
Both companies use straight line depreciation for all assets.
Trial balances of Parcel Corporation and Sack Corporation as of the August 31, 2013, yearend were as shown on page 255.
Part I CoMBINED CoRPORATE ENTITIES AND CoNSOLIDATIONS 254 The trial balances of Silvio Corporation and Jenko Company as of December 31, 2013, were as follows: Silvio Jenko Corporation Company Cash ……………………………………………. . 140,000 205,200 Accounts Receivable …………………………………. . 285,000 110,000 Interest Receivable …………………………………… . 1,500 Notes Receivable ……………………………………. . 50,000 Inventory …………………………………………. . 470,000 160,000 Land …………………………………………….. . 350,000 300,000 Depreciable Fixed Assets ……………………………… . 1,110,000 810,000 Accumulated Depreciation …………………………….. . (500,000) (200,000) Intangibles ………………………………………… . 60,000 Investment in Jenko Company …………………………… . 1,128,000 Accounts Payable …………………………………… . (611,500) (165,000) Note Payable ………………………………………. . (10,000) Interest Payable …………………………………….. . (200) Common Stock ($1 par) ………………………………. . (400,000) Common Stock ($5 par) ………………………………. . (450,000) Paid In Capital in Excess of Par ………………………….. . (1 ,235,000) (180,000) Retained Earnings, January 1, 2013 ………………………. . (958,500) (470,000) Treasury Stock (at cost) ……………………………….. . 315,000 Sales ……………………………………………. . (1 ,020,000) (500,000) (1,500) Interest Income ……………………………………… . Subsidiary Income …………………………………… . (88,000) Cost of Goods Sold ………………………………….. . 705,000 300,000 Other Expenses …………………………………….. . 200,000 90,000 Totals…
Attachments:
Untitled 10 ….pdf
chapter 4.xls