Trim Corporation acquired 100 percent of Round Corporation’s voting common stock
ID: 2475330 • Letter: T
Question
Trim Corporation acquired 100 percent of Round Corporation’s voting common stock on January 1, 20X2, for $400,000. At that date, the book values and fair values of Round’s assets and liabilities were equal. Round reported the following summarized balance sheet data:
Give the journal entries recorded by Trim Corporation during 20X2 on its books if Trim accounts for its investment in Round using the equity method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
b-
Give the consolidation entries needed at December 31, 20X2, to prepare consolidated financial statements. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Trim Corporation acquired 100 percent of Round Corporation’s voting common stock on January 1, 20X2, for $400,000. At that date, the book values and fair values of Round’s assets and liabilities were equal. Round reported the following summarized balance sheet data:
Explanation / Answer
a.
Debit Investment in Round Corporation 400,000
Credit Cash 400,000
Debit Investment in Round Corporation 80,000
Credit Income from Round Corporation 80,000
Debit Cash 25,000
Credit Investment in Round Corporation 25,000
B.
Debit Common stock 120,000
Debit Retained earnings 280,000
Debit Income from Round Corporation 80,000
Credit Dividends declared 25,000
Credit Investment in Round Corporation 455,000
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