This question has 2 parts. I would be appreciate to your help. Thank you so much
ID: 2433041 • Letter: T
Question
This question has 2 parts. I would be appreciate to your help. Thank you so much. OUT REFERENCES MAIL?NGS REVIEW VIEw 3, (45 points) Company Big paid 1,200,000 for 60% of Small's shares on 01/01/2015. On 01/01/2015 Small's final information are as below. (Note that PPE had 5 years of useful life left and Patent had 10 years of useful life left upon the time of investment) 1/1/2015 Cash AR Inventony Land PPE Patent Total Asset Loan Common Stock ADPC Retained Earnings Total Uabilities and Equity Book Value 200,000 300,000 300,000 500,000 500,000 500,000 2,300,000 (1, 500,000) (300, 000) (300,000) Market Vlue 200,000 300,000 300,000 800,000 300,000 1,000,000 2,900,000 (1500,000) (2.300,000)
Explanation / Answer
Journal Entry for Big Date particular Debit Credit 01/01/15 investment in Small $ 12,00,000 To cash/Bank $ 12,00,000 (Being 60% stake purchased in Small) Journal Entry for small There will be no journal entry for small as Big has purchased securities from outsiders and not by fresh issue by small Big Small Consolidated Sales $ (60,00,000) $ (25,00,000) $ (85,00,000) COGS $ 40,00,000 $ 18,00,000 $ 58,00,000 Depreciation $ 5,00,000 $ 1,00,000 $ 6,00,000 Amortisation $ 2,00,000 $ 50,000 $ 2,50,000 Investment Income $ (90,000) $ - $ - Net Income $ (13,90,000) $ (5,50,000) $ (18,50,000) Retained earnings @ 1/1/15 $ (20,00,000) $ (2,00,000) $ (20,00,000) Net Income After Minority $ (13,90,000) $ (5,50,000) $ (16,30,000) Dividend $ 5,00,000 $ 1,50,000 $ 5,00,000 Retained earnings @ 31/12/15 $ (28,90,000) $ (6,00,000) $ (31,30,000) Cash $ 10,00,000 $ 5,00,000 $ 15,00,000 Accounts receivables $ 20,00,000 $ 5,00,000 $ 25,00,000 inventory $ 10,00,000 $ 3,00,000 $ 13,00,000 land $ 30,00,000 $ 5,00,000 $ 35,00,000 PPE(net) $ 20,00,000 $ 4,00,000 $ 24,00,000 patent $ 20,00,000 $ 4,50,000 $ 24,50,000 Investment $ 12,00,000 $ - $ - Goodwill on consolidation $ - $ - $ 7,20,000 Total Assets $ 1,22,00,000 $ 26,50,000 $ 1,43,70,000 Liabilities $ (36,60,000) $ (14,50,000) $ (51,10,000) Common Stock $ (10,00,000) $ (3,00,000) $ (10,00,000) Additional paid in capitals $ (46,50,000) $ (3,00,000) $ (46,50,000) Retanied earnings $ (28,90,000) $ (6,00,000) $ (31,30,000) Total Equity and retained earnings $ (85,40,000) $ (12,00,000) $ (87,80,000) Minority Share $ - $ - $ (4,80,000) $ (1,22,00,000) $ (26,50,000) $ (1,43,70,000)
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