ADVANCED ACCOUNTING PROJECT

All work MUST be done using some type of computer application (xcel, word, etc.
Projects submitted in long hand will not be accepted.
I. Sale of Additional Shares to Parent

Lane Manufacturing Company acquired 75 percent of Tin Corporation stock at underlying book
value. At the date of acquisition, the fair value of the noncontrolling interest was equal to 25
percent of Tin's book value. The balance sheets of the two companies for January 1, 20X1, are
as follows:

LANE MANUFACTURING COMPANY

Balance Sheet
January 1, 20X1

Cash $ 227,500.00 Accounts Payable $ 50,000.00

Accounts Receivable $ 60,000.00 Bonds Payable $ 400,000.00
Inventory $ 100,000.00 Common Stock $ 200,000.00
Buildings & Equipment $ 600,000.00 Additional Paid-In Capital $ 50,000.00
Less: Accumulated Depreciation $ (150,000.00) Retained Earnings $ 400,000.00
Investment in Tin Products $ 262,500.00
Total Assets $ 1,100,000.00 Total Liabilities & Equities $ 1,100,000.00

TIN CORPORATION
Balance Sheet
January 1, 20X1

Cash $ 60,000.00 Accounts Payable $ 50,000.00

Accounts Receivable $ 100,000.00 Bonds Payable $ 300,000.00
Inventory $ 180,000.00 Common Stock ($10 par) $ 100,000.00
Buildings & Equipment $ 600,000.00 Additional Paid-In Capital $ 50,000.00
Less: Accumulated Depreciation $ (240,000.00) Retained Earnings $ 200,000.00
Total Assets $ 700,000.00 Total Liabilities & Equities $ 700,000.00

On January 2, 20X1, Lane purchased an additional 2,500 shares of common stock directly from
Tin for $150,000.

Required:

1. Prepare the following journal entries: 1) consolidation journal entry, 2) journal entry
made on Tin Corporation’s books and 3) journal entry made on Lane’s books.
II. Partnership
James, Keller, and Rivers have the following capital balances; $48,000, $70,000 and $90,000
respectively. Because of a cash shortage James invests an additional $12,000 on June 1st.
Each partner withdraws $1,000 per month. James, Keller, and Rivers receive a salary of
$13,000, $15,000 and $20,000, respectively, for work done during the year. Each partner
receives interest of 8% on their weighted average capital balance without regard to normal
drawings. Any remaining profits are split 20%, 30%, and 50% respectively. The net income for
the year is $30,000.

What are the ending capital balances for each partner? Prepare a “Statement of Partners
Capital Account”

lII. Preparation of Statement of Cash Flows

The accountant for Consolidated Enterprises Inc. has just finished preparing a consoliated
balance sheet, income statement, and statement of changes in retained earnings for 20X3. The
accountant has asked for assistance in preparing a statement of cash flows for the consolidated
entity. Consolidated Enterprises holds 80 percent of the stock of Separate Way Manufacturing.
The following items are proposed for inclusion in the consolidated cash flow statement:

Decrease in accounts receivable $ 23,000.00

Increase in accounts payable $ 5,000.00
Increase in inventory $ 15,000.00
Increase in bonds payable $ 120,000.00
Equipment purchased $ 380,000.00
Common stock repurchased $ 35,000.00
Depreciated reported for current period $ 73,000.00
Gain recorded on sale of equipment $ 8,000.00
Book value of equipment sold $ 37,000.00
Goodwill impairment loss $ 3,000.00
Sales $ 900,000.00
Cost of goods sold $ 368,000.00
Dividends paid by parent $ 60,000.00
Dividends paid by subsidiary $ 30,000.00
Consolidated net income for the year $ 464,000.00

Prepare in good form a statement of cash flows for Consolidated Enterprises, Inc. using the
indirect method of computing cash flows from operations.
IV. Computation of Consolidated Balances
Astor Corporation's balance sheet at January 1, 20X7 reflected the following balances:

Cash & Receivables $ 80,000.00 Accounts Payable $ 40,000.00

Inventory $ 120,000.00 Income Taxes Payable $ 60,000.00
Land $ 70,000.00 Bonds Payable $ 200,000.00
Buildings & Equipment (net) $ 480,000.00 CommonStock $ 250,000.00
Retained Earnings $ 200,000.00
Total Assets $ 750,000.00 Total Liabilities & Stockholders' Equity $ 750,000.00

Phel Corporation,which had just entered into an active acquisition program, acquired 100
percent of Astor's common stock on January 2, 20X7, for $576,000. A careful review of the fair
value of Astor's assets and liabilities indicated the following:

Book Value Fair Value

Inventory $ 120,000 $ 140,000
Land $ 70,000 $ 60,000
Buildings & Equipment (net) $ 480,000 $ 550,000

Assume the book values of Phel's Inventory, Land, and Buildings & Equipment accounts are
$300,000, $85,000, and $1,200,000, respectively.

Required:
Compute the appropriate amount to be included in the consolidated balance sheet immediately
following the acquisition for each of the following items:
a. Inventory
b. Land
c. Buildings & Equipment (net)
d. Goodwill
e. Investment in Astor Corporation