Prepare parent companys equity-method journal entries

Assignment Help Financial Accounting

Reference no: EM131035452

Aesume that Palm Corporation had appropriately used purchase accounting for the December 31 ,2010 business combination with it6 subeidiary, Starr Company. Partial financial statements for both companies tor zAY are below. In addition to the information in the worksheet other 201 1 information follows:

On December 2O,2Al $tarr's Board of Directors paid a cash dividend of $.60 per share on the 40,000 outstanding shares of common stock owned by Palm.

Palm Corporation and Starr Company Separate Financial Statement Data For Year Ended December 31, 2011 (before any year-end 'equity method' entries have been posted)
Balance Sheets	Palm Corp	Starr Co.
Assets
Cash	80,000	75,000
Inventories	136,000	120,000
Other Current Assets	90,000	111,000
Intercompany receivable / payable
Investment in Starr Common Stock
Plant Assets - Net	480,000	290,000
Patent (Net)		20,000
Total Assets		616,000
Liabilities and Stockholders' Equity
Income Taxes Payable	30,000	25,000
Other Liabilities	259,600	163,000
Common Stock, $10 par
Common Stock, $5 par		200,000
Additional Paid in Capital		60,000
Retained Earnings		168,000
Total Liabilities and Stockholders' Equity		616.000

Statements of Income and Retained Earnings For the Year Ended December 31, 2011
Balance Sheets	Palm Corp		Starr Co.
Net Sales		1,000,000	700,000
Intercompany Investment Income
Total Revenue		1,000,000	700,000
Cost of Goods Sold		571,000	450,000
Gross Margin		429,000	250,000
Operating Expenses		220,000	130,000 {see Note Below}
Interest Expense		45,000
Income Tax Expense		65,600	48,000
Total Expenses		330,600	178,000
Net Income		98,400	72,000
Beginning Retained Earnings			120,000
Less: Dividends		(20,000)	(24,000)
Ending Retained Earnings		..............	168,000

Note: Operating Expense includes $20,000 anci $5,000 oi deprecjation expense for Palm and Starr respectivety.

REQUIRED:

Prepare Parent Company's Equity-Method Journal Entries to record the operating results of the subsidiary and any entry necessary to record depreciation and/or amortization of Subsidiary's Net Assets. Note that with respect to Building Depreciation 1/2 is CoGS and 1D is charged to operating expense. Patent amortization is '100o/" CoGS. Also prepare any necessary year end elimination entry or entries, Prepare a working paper for consolidated financial statements and prepare a complete set of consolidated flnancial statements, in good form for 2011 - be sure to include a consolidated statement of cash flows.

Reference no: EM131035452

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