Question

4-On January 2, 2019, Moonshine, Inc. acquired Cambridge as a wholly-owned subsidiary, paying an excess of $400,000 over the book value of Hudson's net assets. One-half of the excess was attributable to equipment with a 4-year life, leaving the remainder as goodwill. The parent uses the equity method of pre-consolidation Equity investment bookkeeping. The 2020 financial statements for the two companies are presented below. Moonshine, Inc. Cambridge Sales $2,500,000 $600,000 Cost of goods sold -1,800,000 -350,000 Gross profit 700,000 250,000 Operating expenses -386,000 -82,000 Equity income 118,000 Net Income $432,000 $168,000 Retained Earnings, 1/1/20 $2,400,000 $160,000 Net income 432,000 168,000 Dividends -19,500 |-103,000 Retained Earnings, 12/31/20 $2,729,000 $308,500 Cash and receivables $1,250,000 $47,500 Inventory 1,540,000 98,000 Equity investment 683,500 Property, plant & equipment (Net) 360,000 5,605,500 $505,500 $9,079,000 Total Assets $39,000 Accounts payable $450,000

Answer 1

Page CA Sales Combined amount of Moonshine one & Cambridge shall be shown on steitement So. $ $ 500 000 + $600000 $3100000 (B) Equity Income l a There is nothing like equity income on consolidated Profet & loss statement Hence amount shall be $0.0 so Operating expense 1 On the same explanation of A) amount shell be $386000 7. $82 800 - $4.68000 CD Accounts Payable "On the same explanation of (A) amount shall be $450000 + $39000, $489000 as there is no intercompany transaction Hence $489000 shall be shown CE Equity investment Egruty inuestment in subsidiary Cambridge shall not be shown hence amount will be $0 on consolidated balance sheet

(F) Property. Plant dequipmanla Chet of deprecabies As one half of excess is attributable to equipment, hence there is a increase in fair value, hence combined amount Ushall be $56055Vot $360000+ $200000 - $6165500 (a) Goodwil Good will consideration paid - Evol net asset to the question it is given that one half of the excess is attributable to good will hence Goodeville $400000X be $200000 CH) Additional Paid in Capital . . at will be always the hole balance of parent company ie Moonshine anc Hence $92000000 shall be chown

Balance as on 1/1/ 20 cho (t) Profets of Moonshine. Profets of Cambridge ( sinidends distributed by Moonshine and Closing retained caming as I on 31/12/20 $2400000 $ 550000 $168000 A ($10060) $ 30,15000