Reference no: EM132597849
Question - On January 1, 20X9, Peery Company acquired 100 percent of Standard Company's common shares at underlying book value. Peery uses the equity method in accounting for its ownership of Standard. On December 31, 20X9, the trial balances of the two companies are as follows:
Peery Co. Standard Co.
Item Debit Credit Debit Credit
Current Assets $238,000 $95,000
Depreciable Assets 300,000 170,000
Investment in Standard Co. 100,000
Other
Expenses 90,000 70,000
Depreciation Expense 30,000 17,000
Dividends Declared 32,000 10,000
Accumulated Depreciation $120,000 $85,000
Current
Liabilities 50,000 30,000
Long-Term Debt 120,000 50,000
Common
Stock 100,000 50,000
Retained
Earnings 175,000 35,000
Sales 200,000 112,000
Income from Standard Co. 25,000
790,000 790,000 362,000 362,000
Required -
1- Prepare the journal entry to record the dividends received during year one.
2- Prepare the journal entry to record the effect of income from subsidiary on the parent's investments.
3- Prepare the consolidation entry necessary to prepare the worksheet at the end of year one.
4- Prepare a schedule to show your book value calculations.