Reference no: EM13348344
Question:
BID Company purchased 75 % ownership of TIC Corporation on January 1, 20X1, for $112,500. On that date, non-controlling interest had a value of $55,200 and TIC reported common stock outstanding of $100,000 and evaluated earnings of $20,000. The full amount of the differential is assigned to land to be used as a future building site. BID uses the adjusted equity method in accounting for its ownership of TIC. On December 31, 20X2, the trial balances of the given companies are as follows:
BID Company TIC Corporation
Item Debit Credit Debit Credit
Cash and Accounts Receivable 69,400 51,200
Inventory 60,000 55,000
Land 40,000 30,000
Buildings and Equipment 520,000 350,000
Investment in Troll Corporation Stock 103,780
Cost of Goods Sold 99,800 61,000
Depreciation Expense 25,000 15,000
Interest Expense 6,000 14,000
Dividends Declared 40,000 10,000
Accumulated Depreciation 175,000 75,000
Accounts Payable 68,800 41,200
Bonds Payable 80,000 200,000
Bond Premium 1,200
Common Stock 200,000 100,000
Retained Earnings 227,960 50,000
Sales 200,000 120,000
Income from Subdidiary 11,020 $963,980 $963,980
$586,200 $586,200
TIC sold inventory costing $25,500 to BID for $ 42,500 in 20X1. BID resold 80 % of the purchase in 20X1 and the get remainder in 20X2. TIC sold inventory costing $21,000 to BID in 20X2 for $35,000, and BID resold 70 percent of it prior to December 31, 20X2. In addition, BID sold inventory costing $14,000 to Troll for $28,000 in 20X2, and TIC sold all but $13,000 of its purchase prior to December 31, 20X2.
Consider both companies use straight-line depreciation and that no plant, property, and equipment has been purchased since the acquisition.
Required
a. Write the journal entries for 20X2 on BID's books related to its investment In TIC Corporation, using the equity method.
b. Write the elimination entries needed to do a consolidated worksheet for 20X2.
c. Prepare a 3-part consolidated worksheet for 20X2.