Asistensi Akuntansi Keuangan Lanjutan 1 Pertemuan 3

Feri Priatna

Chapter 3 The Reporting Entity and The Consolidation of Less-than-Wholly-Owned Subsidiaries

with No Differential

1. Consolidated Worksheet at End of the First Year of Ownership

Romeo Company acquired 80 percent of Juliet Companys outstanding common stock for $296,000
on January 1, 2017, when the book value of Juliets net assets was equal to $370,000. Romeo
uses the equity method to account for investments. Trial balance data for Romeo and Juliet as of
December 31, 2017, are as follows:
Romeo Company Juliet Company
Debit Credit Debit Credit
Cash 191,000 46,000
Account Receivable 140,000 60,000
Inventory 190,000 120,000
Investment in Juliet's Stock ? 0
Land 250,000 125,000
Buildings & 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 Juliet ? 0
Total ? ? 843,000 843,000

Required:
a. Prepare any equity method entry(ies) related to the investment in Juliet Company during 2017.
b. Prepare a consolidation worksheet for 2017 in good form.

2. Consolidated Worksheet at End of the Second Year of Ownership

Problem 1 summarizes the first year of Romeos ownership of Juliet. Romeo uses the equity method
to account for investments. The following trial balance summarizes the financial position and
operations for Romeo and Juliet as of December 31, 2018.
Romeo Company Juliet Company
Debit Credit Debit Credit
Cash 295,000 116,000
Account Receivable 165,000 97,000
Inventory 193,000 115,000
Investment in Juliet's Stock 412,000 0
 Asistensi Akuntansi Keuangan Lanjutan 1 Pertemuan 3
Feri Priatna

Land 250,000 125,000

Buildings & Equipment 875,000 250,000
Cost of Goods Sold 278,000 178,000
Depreciation Expense 65,000 12,000
Selling & Administrative Expense 312,000 58,000
Dividends Declared 90,000 30,000
Accumulated Depreciation 630,000 48,000
Accounts Payable 85,000 40,000
Bonds Payable 150,000 100,000
Common Stock 625,000 250,000
Retained Earnings 479,400 188,000
Sales 880,000 355,000
Income from Juliet 85,600 0
Total 2,935,000 2,935,000 981,000 981,000

Required:
a. Prepare any equity method entry(ies) related to the investment in Juliet Company during 2018.
b. Prepare a consolidation worksheet for 2018 in good form.

3. Equity & Cost Method

Brown Corp. acquired 75% of Cony Corp. on January 1, 2017 ($862,500) in exchange for cash. The
book value of Cony Corp.s individual assets and liabilities approximated their acquisition date fair
values. During 2017, Cony Corp. reported $280,000 in net income and declared $20,000 in
dividends. Brown Corp. reported $650,000 in net income and declared $45,000 in dividends.
Brown Corp. account for its investment using Equity Method.
On the date of acquisition, Brown Corp. reported the following:

Cash 350,000 Accounts Payable 170,000

Inventory 100,000
Equipment (net) 320,000 Common Stock 100,000
Property 550,000 Retained Earnings 1,050,000
Total Assets 1,320,000 Total Liab. & Equity 1,320,000

Required:
a. What journal entry will Brown Corp. make on the date of acquisition to record the investment in
Cony Corp.?
b. If Brown Corp. were to prepare a consolidated balance sheet on the acquisition date (January
1, 2017), what is the elimination entry it would use in the consolidation worksheet?
c. What is the cost method entry by Brown Corp. and elimination entries to prepare consolidation
worksheet on December 31, 2017?
 Asistensi Akuntansi Keuangan Lanjutan 1 Pertemuan 3
Feri Priatna

4. HOMEWORK
Brown Company acquired 90% of Cony Companys outstanding common stock for $270,000 on
January 1, 2017, when the book value of Conys net assets was equal to $300,000. Brown uses
the equity method to account for investments. Trial balance data for Brown and Cony as of January
1, 2017, are as follows:
Brown Cony Required:
Company Company
a. Prepare the journal entry on
Assets
Browns books for the
Cash 55,000 20,000 acquisition of Cony on
Accounts Receivable 50,000 30,000 January 1, 2017.
Inventory 100,000 60,000
b. Prepare a consolidation
Investment in Cony Stock 270,000
worksheet on the acquisition
Land 225,000 100,000
date, January 1, 2017, in
Buildings & Equipment 700,000 200,000
good form.
Accumulated Depreciation (400,000) (10,000)
Total Assets 1,000,000 400,000

Liabilities & Stockholders Equity

Accounts Payable 75,000 25,000
Bonds Payable 200,000 75,000
Common Stock 500,000 200,000
Retained Earnings 225,000 100,000
Total Liabilities & Equity 1,000,000 400,000