On January 1, 20X9, Zigma Company acquired 100 percent of Standard Company\'s co
ID: 2575124 • Letter: O
Question
On January 1, 20X9, Zigma Company acquired 100 percent of Standard Company's common shares at underlying book value. Zigma 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:
Required
a. Prepare the journal entries on Zigma’s books for the acquisition of Standard on January 1, 20X9 as well as any normal equity-method entry(ies) related to the investment in Standard Company during 20X9.
b. Prepare the consolidation entries needed as of December 31, 20X9, to complete a consolidation worksheet.
c. Prepare a consolidation worksheet as of December 31, 20X9.
Zigma Company Standard Company Item Debit Credit Debit Credit Current Assets 238,000 95,000 Depreciable Assets 300,000 170,000 Investment in Standard Company 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 Company 25,000 790,000 790,000 362,000 362,000Explanation / Answer
Answer: a.
Investment in Subsidary A/c dr. 100000
To Bank A/c 100000
(Being 100% investment purrchased)
Answer: b.
Consolidate Profilt and Loss A/c
Sales 312000
Less:Operating Expe: 160000
Less; Depreciation: 47000
CPL 105000
Less: Dividend 42000
Retain earning 63000
Answer: c
Libilities Amount assets Amount Current Libilities 80000 Depreciable Asstes 470000 Accumulated Dep 205000 Current Assets 333000 Long Term Debt 170000 Goodwill 100000 Commom Stock 150000 Retain Earning 298000 Total 903000 Total 903000