Paper Company acquired 80 percent of Scissor Company’s outstanding common stock for $296,000 on January 1, 20X8, when the book value of Scissor’s net assets was equal to $370,000. Paper uses the equity method to account for investments. Trial balance data for Paper and Scissor as of December 31, 20X8, are as follows: Paper Company Scissor Company Debit Credit Debit Credit Cash $ 191,000 $ 46,000 Accounts Receivable 140,000 60,000 Inventory 190,000 120,000 Investment in Scissor Company 350,400 0 Land 250,000 125,000 Buildings and Equipment 875,000 250,000 Cost of Goods Sold 250,000 155,000 Depreciation Expense 65,000 12,000 Selling & Administrative Expense 280,000 50,000 Dividends Declared 80,000 25,000 Accumulated Depreciation $ 565,000 $ 36,000 Accounts Payable 77,000 27,000 Bonds Payable 250,000 100,000 Common Stock 625,000 250,000 Retained Earnings 280,000 120,000 Sales 800,000 310,000 Income from Scissor Company 74,400 0 Total $ 2,671,400 $ 2,671,400 $ 843,000 $ 843,000 Required: Prepare any equity method entry(ies) related to the investment in Scissor Company during 20X8. Prepare a consolidation worksheet for 20X8. Assume the company prepares the optional Accumulated Depreciation Consolidation Entry.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Paper Company acquired 80 percent of Scissor Company’s outstanding common stock for $296,000 on January 1, 20X8, when the book value of Scissor’s net assets was equal to $370,000. Paper uses the equity method to account for investments. Trial balance data for Paper and Scissor as of December 31, 20X8, are as follows:

	Paper Company	Scissor Company
Debit	Credit	Debit	Credit
Cash	$ 191,000		$ 46,000
Accounts Receivable	140,000		60,000
Inventory	190,000		120,000
Investment in Scissor Company	350,400		0
Land	250,000		125,000
Buildings and Equipment	875,000		250,000
Cost of Goods Sold	250,000		155,000
Depreciation Expense	65,000		12,000
Selling & Administrative Expense	280,000		50,000
Dividends Declared	80,000		25,000
Accumulated Depreciation		$ 565,000		$ 36,000
Accounts Payable		77,000		27,000
Bonds Payable		250,000		100,000
Common Stock		625,000		250,000
Retained Earnings		280,000		120,000
Sales		800,000		310,000
Income from Scissor Company		74,400		0
Total	$ 2,671,400	$ 2,671,400	$ 843,000	$ 843,000

Required:

Prepare any equity method entry(ies) related to the investment in Scissor Company during 20X8.
Prepare a consolidation worksheet for 20X8. Assume the company prepares the optional Accumulated Depreciation Consolidation Entry.

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