Lake Company reported the following summarized balance sheet data as of December
ID: 2334606 • Letter: L
Question
Lake Company reported the following summarized balance sheet data as of December 31, 20X2:
Lake issues 4,400 additional shares of its $10 par value stock to its shareholders as a stock dividend on April 20, 20X3. The market price of Lake’s shares at the time of the stock dividend is $40. Lake reports net income of $32,000 and pays a $14,500 cash dividend in 20X3. Lindale Company acquired 70 percent of Lake’s common shares at book value on January 1, 20X1. At that date, the fair value of the noncontrolling interest was equal to 30 percent of Lake’s book value. Lindale uses the equity method in accounting for its investment in Lake.
Required:
a.
Prepare the journal entries recorded by Lake and Lindale at the time the stock dividend is declared and distributed. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
*Record the issuance of a stock dividend by Lake Company.
*Record the issuance of a stock dividend by Lake Company in the books of Lindale.
b.
Prepare the worksheet consolidation entries needed to prepare consolidated financial statements for 20X3. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
*Record the basic consolidation entry.
c.
Prepare the worksheet consolidation entry needed to prepare a consolidated balance sheet on January 1, 20X4. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
*Record the basic consolidation entry.
Cash $ 38,000 Accounts Payable $ 49,000 Accounts Receivable 87,000 Common Stock 130,000 Inventory 96,000 Retained Earnings 207,000 Buildings & Equipment 285,000 Less: Accumulated Depreciation (120,000) Total Assets $ 386,000 Total Liabilities & Equities $ 386,000Explanation / Answer
a) Journal Entries Lake company Stock dividends Declared 44000 to common stock 44000 Lindale company = no entry required b) calculation of Book value Particulars NCI 30% + Lindale co70% = common stock + Retained earning original book value 101100 235900 130000 207000 Add: net income 9600 22400 32000 less: dividends 4350 10150 -14500 less: stock dividend 44000 -44000 ending book value 106350 248150 174000 180500 common stock 174000 retained earning 207000 income from lake co 22400 NCI in NI of lake co 9600 devidend declared 14500 stock dividends declared 44000 investment in lake co 248150 NCI IN NA of lake co 106350 C) Calculation of Book value Particulars NCI 30% + Lindale co70% = common stock + Retained earning Original books value 106350 248150 174000 180500 total 106350 248150 174000 180500 Common stock 174000 retained earning 180500 investment in lake co 248150 NCIIN NA OF LAKE CO 106350
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