Question

Plexi Company purchased 85% of the outstanding common stock of SesnorCompany on lanuary , mort,mon. NOTE COST METHOD USED BY PARENT S sooo Jan. 1, ZOS investment in Subsidiary . Sesnor $5,700,000 The Sesnor Compeny balanccahet on 1/1/09 and 12/31/12 are as follows: Fair Value Cash 120,000 260,000 350,000 $ 450,000 1,275,000 950,000 $ 3,200,000 3,450,000 1,000,000 1,000,000 120,000 Accounts Receivable Net Plant Assets Other Assets 1,275,000 $ 3,200,000 $ 2,500,000 1,500,000 Total Assets 45,000 5 6360,000 Accounts Payable Other Uablities 1,375,000 1,150,000 500,000 S325,000 1,875,000 $ 1475,000 $ 1,375,000 $750,000 $ 250,000 Total Liabilities Common Stock (Par $1) 100,000 $ 100,000 900,000 900,000 3,070,000 $ 3,885,000 4.070,000 4,885,000 Retained Eamings Total Equity Total Liabilities &Equity $5945,000 S 6360,000 85%Ownership 85% Parent 15% 100% NCI Fair Value Given Up Book Value Received $5,700,000 1,005,882 6,705,882 $ 4,070,000 $2,635,882 1,500,000 250,000 $ 3,459,500 S 610,500 Difference Land Other Liabilities 2,240,500 $ 1,275,000 $ 225 $212,500 $ S 1,178,000 $ 207,882 37,500 1,385, Goodwill 1,178,000 $ 207,882 1,385,882 Balance 100% During 2012, Sesnor Company declared dividends in the amount of During 2012, Sesnor Company had net income in the amount of $212,500 Sesnor Company Retained Earnings as of 12/31/2011 was S3,200,000 PREPARE THE WORKPAPER (and related workpaper entries)THAT WOULD BE MADE IN THE PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS ON DECEMBER 31, 2012 Cost Method-After Year of Acquisition the following workpaper entries are made 4) What is the following entry Debit Credit Investment in Subsidiary-Sesnor Company 110,500 Retained Earnings 1/1Current Year- Parent $ 110,500

Answer 1

Investment in Subsidiary Company-Sesnor Company					110500
Retained Earnings 1/1 Current year-Parent						110500
The above entry is made to incorporate the profits earned by subsidiary
85% of (3200000-3070000) = $110500
Dividend Income					212500
Dividend Declared Sub-Sesnor Company						212500
The above entry is made to account for the dividend declared by the subsidiary
85% of 250000 = $212500
Common Stock Sesnor Co.					100000
APIC Sesnor Co.					900000
Retained Earnings - Sesnor Co.					3200000
Difference					2635882
Investment in Subsidiary Company-Sesnor Company						5810500
NCI						1025382
The above entry is made at the time of Consolidation of Accounts of Subsidiary and it is used to eliminate own investment in Subsidiary and account for Non- Controlling Interest
Investment In Subsidiary = 5700000+85% of(3200000-3070000) = $5810500
Non- Controlling Interest = 15% of
(100000+900000+3200000+2635882) = $1025382
Land		1500000
Goodwill		1385882
Other liabilities			250000
Difference			2635882
First 4 sub-parts can be answered at a go.