B. Woods Chapter 7 electronic

B. Woods Chapter 7 electronic - 208 Chapter 7 INTERCOMPANY...

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Unformatted text preview: 208 Chapter 7 INTERCOMPANY PROFIT TRANSACTIONS BONDS Electronic Supplement Solution W7-1 Supporting computations: Book value of bonds January 1, 2008 [$200,000 + ($800 x 5 years)] x 50% $102,000 Cost of bonds 95,000 Constructive gain $ 7,000 Interest expense [($200,000 x 8%) - $800 amortization] x 50% $ 7,600 Interest income ($100,000 x 8%) + $1,000 amortization 9,000 Piecemeal recognition of gain $ 1,400 or $7,000/5 years = $1,400 Constructive gain on bonds not recognized on separate company books on December 31, 2008 is $5,600. Pike Corporation and Subsidiary Separate Company and Consolidated Balance Sheet at December 31, 2008 Pike Sack Consolidated Assets Cash $ 83,000 $ 25,000 $108,000 Bond interest receivable --- 4,000 --- Other receivables 60,000 25,000 85,000 Inventories 120,000 70,000 190,000 Plant assets-net 250,000 180,000 430,000 Investment in Sack stock 385,600 --- --- Investment in Pike bonds --- 96,000--- $898,600 $400,000 $813,000 Equities Accounts payable $ 28,000 $ 20,000 $ 48,000 Bond interest payable 8,000 --- 4,000 8% bonds payable 203,200 --- 101,600 Common stock, $10 par 400,000 300,000 400,000 Retained earnings 259,400 80,000 259,400 209 Intercompany Profit Transactions - Bonds $898,600 $400,000 $813,000 210 Chapter 7 Solution W7-2 Phil Corporation and Subsidiary Consolidated Balance Sheet at December 31, 2006 Assets Current assets Cash $ 44,400 Accounts receivable 57,200 Inventories a 44,000 $145,600 Plant and equipment-net b 72,000 Total assets $217,600 Equities Liabilities Accounts payable $ 35,500 10% bonds payable c 18,200 $ 53,700 Stockholders equity Common stock $100,000 Retained earnings d 60,160 160,160 Minority interest e 3,740 Total liabilities and stockholders' equity $217,600 a Combined inventories of $46,000 - $2,000 unrealized profit = $44,000 b Combined plant assets of $80,000 - $14,000 combined depreciation + $6,000 unamortized excess = $72,000. c Book value of Sam's bonds of $36,400 - $18,200 intercompany bonds = $18,200. d Phil's retained earnings per books $68,500 Less: Depreciation on excess allocated to plant and equipment- 4,000 Less: Unrealized inventory profit- 2,000 Less: Constructive loss on bonds ($3,250 x 90%)- 2,925 Add: Piecemeal recognition of loss ($650 x 90%) + 585 $60,160 e Sam's stockholders' equity as reported $40,000 Less: Constructive loss on bonds- 3,250 Add: Piecemeal recognition of loss + 650 Sam's realized stockholders' equity 37,400 Minority interest percentage 10% $ 3,740 211 Intercompany Profit Transactions - Bonds Solution W7-3 Pile Corporation and Subsidiary Consolidation Working Papers for the year ended December 31, 2004 | | | Adjustments and |Consolidated | Pile |Scud 100% | Eliminations | Statements | | | | | Income Statement | | | | | Sales |$150,000 |$ 55,000 | | | $205,000 Income from Scud | 25,000 | |b 25,000| | Interest income | | 5,500 |a 5,500| | Gain on bonds | | | |a 4,000| 4,000 Cost of sales | 73,000*| 20,000*| | | 93,000* Depreciation expense | 28,000*| 9,000*|...
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This note was uploaded on 04/04/2012 for the course ACCT 111 taught by Professor Bemo during the Spring '12 term at Nanyang Technological University.

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B. Woods Chapter 7 electronic - 208 Chapter 7 INTERCOMPANY...

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