ADVANCE ACCOUNTING I ASSIGNMENT I
Project I
The pre-closing general ledger trial balances at December 31, 19x5, for Baltimore Company
and its Atlanta branch are shown below:
Baltimore Company
General Ledger Trial Balances
December 31, 19 x 5
Home Office
Branch
Dr. (Cr.)
Dr. (Cr.)
Cash
$36,000
$8,000
Accounts receivable
35,000
12,000
Inventory Home
70,000
Inventory Branch
15,000
Fixed Assets (net)
90,000
Investment in Branch
20,000
Accounts payable
(36,000)
(13,500)
Accrued expenses payable
(14,000)
(2,500)
Home office equity
(9,000)
Capital stock
(50.,0000
Retained Earnings
(45,000)
Home office
Sales
(440,000)
Purchases
290,000
Expenses
44,000
Branch
Sales
(95,000)
Purchases
24,000
Purchases from home office
45,000
Expenses
16,000
Total
-0-0Your audit disclosed the following:
1. On December 23, the branch manager purchased $4,000 of furniture and fixtures but failed
to notify the home office. The bookkeeper, knowing that all fixed assets are carried on the
home office books, recorded the proper entry on the branch records. It is the company’s
policy to take any depreciation on assets acquired in the last half of a year.
2. On December 27, a branch customer erroneously paid his account of $2,000 to the home
office. The bookkeeper made the correct entry on the home office books but did not notify
the branch.
3. On December 30, the branch remitted cash of $5,000 which was received by the home office
in January 19x6.
4. On December 31, the branch erroneously recorded the December allocated expenses from
the home as $500 instead of $1,500.
5. On December 31, the home office shipped merchandise billed at $3,000 to the branch, which
was received in January 19x6.
6. The entire beginning inventory of the branch had been purchased from home office. Home
office 19x5 shipments to the branch were purchased by the home office in 19x5. The
physical inventories at December 31,19x5 excluding the shipment in transit, are home
office,$55,000(at cost); and branch ;$20,000 (composed of $18,00 from home office and
$2,000 from outside vendors).
7. The home office consistently bills shipments to the branch at 20%above cost .The sales
account is credited for the invoice price.
Required (Disregard income tax)
1. Prepare a worksheet showing Adjustments and Eliminations, Home office income
statement, Branch income statement, and Combined Balance sheet.
Project II
1. On March 31, 1999 Combiner Company issued 100,000 shares of its $1 par common stock
(current fair value $5 per share) for all issued and outstanding common shares of combine
company. Also on that date, combiner paid $70,000 out-of-pocket costs for accounting and
legal fees relating to business combination.
The balance sheet of combine on March 31, 1999, with related current fair values, was as
follows.
Combine Company
Balance sheet
March 31, 1999
Assets
carrying amount
Current fair values
Current assets…………………….…..….......… Br.200, 000……………..$260,000
Plant assets…………….……………..……………. 400,000………..…….480, 000
Other assets……………….………..……...………..140,000……………....150,000
Total assets………………………..……….,.…….. 740,000…………..………0.00
Liabilities and stockholders’ equity
Current liabilities………………..........….....$80,000…………..….$80, 000
Long-term debt…………………..…....……260,000…………..…..260,000
Common stock, no-par -………..…...………150,000
Retained earnings……………………….....250,000
Total liabilities and stockholder’s ‘Equity….740,000
Required
A. Calculate Total Investments in C/S
B. Calculate Paid in capital in Excess of par
C. Record Journal Entries
D. Compute Good Will
Project III
1. On May 31, 1999 Pimo Corporation acquired for $ 760,000 cash, including direct out out-ofpocket costs of business combination, 80% of the outstanding common stock of Sob
Company. Sobo was to be a subsidiary of Pimo.
Additional information for May 31, 1999:
1. Sobo company’s total stockholders’ equity prior to the business combination was $ $700,000
2. Differences between current fair values and carrying amount of Sobo’s identifiable assets
were as follows (the current fair values of Sobo’s other assets and its liabilities equaled their
carrying amounts):
Current fair
Carrying
values
amounts
Differences
Inventories
$ 120,000
$ 80,000
$ 40,000
Land
300,000
250,000
50,000
Building (net)
800,000
740,000
60,000
Totals
$ 1,220,000
1070,000
150,000
Required.
1. What amount would be assigned to goodwill on May 31, 1999 based on the
parent company’s investment?
2. What amount would be assigned to minority interest in net assets of subsidiary?
Problem IV
To illustrate the preparation of consolidated financial statement, assume on December 31, 19x1 Pele
company, a calendar – year reported company, acquired 75% of the outstanding common stock of Pima
company at a total cost of $450,000. Each of puma’s assets and liabilities has a current value equal to its
book value. Each company’s financial statements for the year ended December 31, 19x1, immediately
after the acquisition date, are as follows.
Pele Company
(000)
Income statement (19x1)
Sales
Cost of goods sold
Expense
Net income
Balance sheet (as of Dec, 31, 19x1)
Current assets
Interest mint in Pima Company
Non – current assets (net)
Total assets
Liabilities
Common stock
Additional paid in capital
Retained earnings
Total liabilities & equity
Pima Company
(000)
$800
(500)
(2100)
900
$700
(300)
(280)
120
$2750
450
4,800
8,000
3,000
1,000
2,000
2,000
8,000
$1,200
1,000
2,200
$1,600
100
200
300
2,200
The subsidiary’s revenue and expense to be included in the consolidated income statement are only post
acquisition ones. The consolidated income statement of Pele for yearend Dec. 31, 19x1 includes only
Pele’s revenue and expense since there is no post acquisition revenue of expense of the subsidiary.
Instruction
A. Prepare Consolidated Financial Statement
B. Calculate Minority Interest
C. Calculate Good Will