Advanced Accounting Part 2B Fall 2017 The assignment must be done using an excel

Question

Advanced Accounting Part 2B Fall 2017 The assignment must be done using an excel spreadsheet. Everything else must be done on a word processor. Label everything. Please work alone. Good luck. Due date: Nov 13 You must hand in a hard copy and email the file to me on that day Use formulae on the spreadsheet. On January 2, 20x4, Puma Co. purchased 70% of Squirrel Co.'s common stock for S 270,200. At that date the fair value of the noncontrolling interest was equal $115,800. On that date the Squirrel's net assets had a book value of $350,000. The book values and fair values of Squirrel's assets and liabilies were equal except land that had a fair value $10,000 higher tha assigned to goodwill. n the book value, the rest of the differential is a) Puma sold inventory costing $48,000 to Squirrel for $80,000 in 2014, of which $20,000 Squirrel b) Squirrel sold inventory costing $120,000 to Puma for S 200,000 in 20x4, Puma resold 52.5% of it c) Puma sold goods costing $54,000 to Squirrel for $90,000. Squirrel continues to hold $20,000 of d) During 2015 Squirrel sold inventory costing $74,000 to Puma for $124,000. Puma held all i he end of 20x4. Squirrel sold all of it to unaffiliated customers in 20xS. in 2014 and the remainder in 2015. its purchase from Puma on December 31, 20x5, inventory purchased from Squirrel during 2015 on December 31, 20x5 Assume both companies use straight-line depreciation and that all depreciable assets have a 10 year life from the date of acquisition. Puma uses the fully adjusted equity method. The 20x5 trial balances for Puma Co. and Squirrel Co. are given below. Puma Co. Debit Squirrel Co. Debit Credit Item 55,300 26,000 200,000 30,000 210,000 265,700 25,000 70,000 110,000 20,000 200,000 Cash Accounts Rec Inventory land Equipment(net) Investment in Squirrel Co. Cost of Goods Sold 190,000 40,000 10,000 35,000 140,000 20,000 10,000 5,000 Depreciation Expense Other Expenses Dividends declared Accounts Payable Notes Payable Common Stock Add. Paid in Capital Retained Earnings Sales Income from Sun Co. 5,000 25,000 150,000 140,000 428,000 300,000 14,000 5,000 15,000 100,000 30,000 240,000 210,000 $1,062,000 $1,062,000 $600,000 $600,000

Explanation / Answer

A. Entries recorded by Puma on its investment in Squirrel:

Cash

3,500

Investment in Squirrel Corporation Stock

3,500

(Record dividends from Troll: $5,000 x .70)

Investment in Squirrel Corporation Stock

24,500

Income from Subsidiary   

24,500

Record equity-method income: $(3,85,000-350000) x .70

Calculation of Closing Net assets:-

Net assets from trial balance                                                                                      405000

Less:- Purchases still held by squirrel                                                                       20000

385000

Cash

3,500

Investment in Squirrel Corporation Stock

3,500

(Record dividends from Troll: $5,000 x .70)

Investment in Squirrel Corporation Stock

24,500

Income from Subsidiary   

24,500

Record equity-method income: $(3,85,000-350000) x .70

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