Illustration 3.

5
Paseo Corporation acquired 82% common stock = $328,000.00
Steppe stock holder equity;
-

Common stock
= $50,000.00
Additional paid in Capital = 75,000.00
Retained Earning
= 135,000.00

Total stock holder equity

= 260,000.00

The difference between the carrying amount and net identifiable asset of Steppe
Carrying Amount
Land
Building /EL 10yrs /
Patent/EL 8yrs/
Total

$100,000.00
200,000.00
60,000.00
360,000.00

CFVs
$120,000.00
250,000.00
80,000.00

Difference
$20,000.00
50,000.00
20,000.00

450,000.00

90,000.00

Determination of Goodwill:
Cost of Paseo Corporation 82% interest in Steppe______________________ $328,000.00
Less: CFVs of Steppe corporation Identifiable net Asset(260,000+90,000)82% 287,000.00
Amount of Goodwill_______________________________________________$41,000.00
During March 31,2000 declared NI of 1.2/share X 25,000.00 = $30,000.00
1. Parent Company Under the equity method records the following Journal Entries:
Investment in steppe Co. common Stock_____________________________$328,000.00
Cash__________________________________________________________328,000.00
March 31, 2000

Inve. In steppe Co common stock /30,000X 0.82/_____24,600.00

Investment income_______________________________24,600.00

/To record 82% of NI Steppe company for one year ended March31,2000/

To amortize the difference between CFVs and carrying amount of stepp Company in
Identifiable asset on December 1999 as follows:
Building/50,000 /10yrs/________________5,000.00
Patent /20,000/8yrs/_________________
2,500.00
Total_______________________________$7,500.00
Amortization for 2000, (7, 5000 X 0.82) _____________________$ 6,150.00
Subsidiary Income ________________________6,150.00
Investment in Steppe co. C/stock________________6,150.00

Paseo Corporation and subsidiary

Working paper Elimination
March 31, 2000
Common Stock____________________________________________50,000.00
Additional Paid in Excess of Capital____________________________75,000.00
Retained Earning ____________________________________________135,000.00
Intercom any Investment Income________________________________18,450.00
Building

45,000.00

Land_______________________________________________________20,000.00
Patent- Steppe_______________________________________________17,500.00
Goodwil-Steppe_____________________________________________41,000.00
CGS- Steppe_________________________________________________ 5,000.00
Operating Expense-Steppe_______________________________________2,500.00
Investment in steppe co._________________________________346,450.00
Minority Interest/350,000 X .18/__________________________63,000.00

Minority Interest NI of Subsidiary company_______________________4,050.00

Minority interest /350,000 X 0.18/_______________________________4,050.00
NI for the year 2000 as follow
NI of subsidiary_____________________________$30,000.00
Less: Net reduction elimination /5000+2500/________(7,500.00)
Minority interest share___________________________22,500.00
Times___________________________________________0.18
4,050.00

Illustration 3.6
Sallow Company the following Journal Entries
Jan.31, 2000

Dividend declared______________________60,000.00
Dividend payable/60,000 X 0.15/______________9,000.00
Inter company Dividend payable______________51,000.00
/To record dividend declared by Subsidiary on Jan.2000/

Feb.28,200

Dividend Payable _________________9,000.00

Inter company Dividend payable_____51,000.00
Cash____________________________________60,000.00

/To record the payment of dividend on Feb. 28,2000/

Palid Corporation has the following journal entries Under the equity method record the
following Journal Entries:
Jan.31,2000 Inter company Dividend Receivable_____________________51,000.00
Investment in Sallow co/ c/stock_____________________51,000.00
/To record dividend declaration by subsidiary/
Feb.28,2000 Cash_______________________51,000.00
Inter company income________________________51,000.00
/To record dividend receipt form shallow/
Jan.31,2001

Investment in shallow Co/120,000X.85/___________102,000.00

Inter company interest Income____________________102,000.00

/To record Net income declared form subsidiary /

Palid Corporation and subsidiary

Work paper Elimination
January 31, 2000

Common Stock ______________________________________50,000.00

Retained earning______________________________________90,000.00
Inter Company investment/102,000-12,750/_________________89,250.00
Plant Asset___________________________________________45,000.00
Goodwill_____________________________________________20,000.00
Cost of good sold______________________________________15,000.00
Operating Expenses_____________________________________1,000.00

Investment in shallow company_____________________________218,250.00

Minority Interest/ 30,000-(60,000X.15)_________________________21,000.00

Assignment 3
Pavich Corporation acquired 75% Sisller company = $547,500.00
Cost Price = $547,500.00
The Sisler Company identifiable asset and the CFV of asset of combination
Stockholder equity:
Common stock$10par_____________________________$250,000.00
Additional paid in excess of capital__________________100,000.00
Retained Earning____________________________

200,000.00

Total Stockholder equity_________________________

$550,000.00

CFVs of sisler identifiable asset Oct.1, 1999

Inventory_________________________________$30,000.00
Plant asset_________________________________50,000.00
Patent(EL 5yrs)_____________________________ 20,000.00
Total Difference______________________________100,000.00
The total net identifiable asset of sisler company $650,000.00
Determination of goodwill:
Cost of Sisler Company at 75% acquired C/stock____________$547,000.00
Less: sisler identifiable net asset/650,000X.75)_______________ 487,500.00
Goodwill____________________________________________$60,000.00
A, Sisler Journal Entries
Sep.30,2000

Dividend declared____________________10,000.00
Dividend payable/10,000X.25/________________2,500.00
Inter company dividend______________________7,500.00

/To record dividend payable by subsidiary Sep.30, 2000/

Sep.30,2001

Dividend declared____________________75,000.00
Dividend payable/75,000X.25/________________18,750.00
Inter company dividend______________________56,250.00

/To record dividend payable by subsidiary Sep.30, 2001/

Pavich Corporation prepare the following journal Entries

Oct.01, 1999 Investment in Sisler Co.____________________________547,500.00
Cash_____________________________________________547,000.00
Sept.30, 2000 Investment in Sisler Company.________________________60,000.00
Inter company investment income____________________60,000.00
/To record 75% of NI pavich corporation/
Sep.30, 2001

Investment in sisler Co/0.75X120,000/________________90,000.00

Inter company investment income_____________________90,000.00

/ To record declared NI by Subsidiary/

Sep.30, 2001 Inter company investment income/30,000+5000+4000/ x .75___29,250.00
Investment in Sisler co__________________________29250.00
/To record amortization difference b/n CFVs and Carrying amount sisler company asset/
Sep.30,2001

Cash_______________________________56,250.00
Investment in Sisler company___________________56,250.00

/To record dividend received from Sisler company/

Sep.30,2001 Investment in Sisler company/120,000 x 0.75/ _____________90,000.00
Inter company investment income_____________________90,000.00
/ To record dividend received company investment income/

Sep.30 2001 Inter company investment income/5000+4000/ X 0.75_________6,750.00

Investment in sisler company C/stock___________________6,750.00
//To record amortization difference b/n CFVs and Carrying amount sisler company asset/

Pavich Corporation and subsidiary

Working Paper elimination
Sep.30, 2000
Common Stock Sisler______________________________________250,000.00
Additional paid Capital Sisler________________________________100,000.00
Retained Earning-Sisler_____________________________________200,000.00
Inter Company investment income pavich/60,000-29500/___________30,750.00
Plant Asset Sisler/50000-5000/________________________________45,000.00
Goodwill-Pavich_____________________________________________60,000.00
Cost Good sold_______________________________________________35,000.00
Operating Expense_____________________________________________4,000.00
Investment in Sisler Co. C/stock Pavich_____________________570,750
Dividend declared______________________________________10,000.00
Minority interest in net asset of subsidiary
(650,000X 0.25)-(10,000X0.25) _______________________160,000.00

Minority interest net income/80,000-39,000/x0.25__________________10,250.00

Minority interest in net asset of subsidiary________________________10,250.00

Pavich Corporation and subsidiary

Working Paper elimination
Sep.30, 2001
Common Stock Sisler______________________________________250,000.00
Additional paid Capital Sisler________________________________100,000.00
Retained Earning/200,000+80,000)-(10,000+23,250)______________246,750.00
Retained Earning Subsidiary- Pavich (30,750-7500)________________23,.250.00
Inter Company investment income pavich/90,000-6750/_____________83,250.00
Plant Asset Sisler/45,000-5000/________________________________40,000.00
Patent (net)- Sisler/16,000-4000/________________________________12,000.00
Goodwill-Pavich_____________________________________________60,000.00
Cost Good sold-Sisler_________________________________________5,000.00
Operating Expense_____________________________________________4,000.00
Investment in Sisler Co. C/stock Pavich/570,750-56,250+90,000/____570,750
Dividend declared-Sisler____________________________________75,000.00
Minority interest in net asset of subsidiary
(160,000 + 10,250) -75,000 X 0.25______________________151,500.00
Minority interest NI of Subsidiary
(120,000-9000) X0.25____________________________________ 27,750.00
Minority interest Net asset of Subsidary_________________________27,750.00
\To establish Minority interest in subsidiary net income for year 2001/

Illustration 3.7
Sage prepares the following journal entries for the declaration and payment of the
NOV, 22, 2001

dividend declared

50,000

Dividend payable

2500

Inter company DP

47,500

(To record declaration of dividend payable Dc,12 to stock holder of record Dec.1,2001)
Dec, 12

Dividend payable

2,500

Inter com Dividend payable

47,500

Cash

50,000

/To record payment of dividend declared Nov22,2001 to stock holder of record Dc 1,2001./
Post`s journal entries for 2001 under the equity method of accounting include the following.
Nov22 .2001 Intercompany dividend Receivable
Invest in sage common stock

47,500
47,500

/To record dividend declared by sag comp pay Dec17, 2001 to stock holder of record Dec,1,2001./
Cash____________47,000
Inter dividend Receivable

47,000

(To record receipt of dividend from sage company)

Dec31, 2001 Investment in sage company _________99,750.00
(105,000 * 95%)
Inter company investment income 99,750
To record 95% of net income of Sag Company for the year ended Dec 31, 2001.)

Post Corporation and subsidiary

Working paper elimination
Dec 31, 2001

Common stock sage

Additional pic sage
Retained earnings sage
Intercompany income post
Plant asset net sage (176,000 14,000)
Lease hold (net) sage (25,000 5000)
Good will (net) sage
Cost of goods sold sage
Operating expense sage

400,000.00
335,000.00
334,000.00
34,200.00
162,000.00
20,000.00
37,050.00
17,000.00
2000.00

Post Corporation investment in sage co 1,230,250.00

Minority interest net asset of Sage_______61,250.00
Dividend declared___________________50,000.00