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Advanced Financial Accounting
Chapter 5 Assignment to Turn In
Due no later than 11:59 pm CDT, Sunday, October 22. This is an individual activity. Upload your solution
as an Excel file to your Assignments. Late submissions will not be accepted.
1. S is an 80% owned subsidiary of P, Inc. P accounts for S using the equity method. The following facts
apply:
On January 2, 2021, S purchased a machine with a cost of $160,000 and accumulated depreciation of $60,000
from P for $120,000. The machine had a 5-year remaining life on January 2, 2021, and is being depreciated by
the straight-line method.
In 2024 P reported net income of $180,000 without including income from S. S reported net income of
$100,000.
Required:
a. From the foregoing information, prepare the required consolidation entries for the 2024
consolidated worksheet in general journal form. For any debit or credit to retained
earnings or to an income statement account, indicate whether it is the parent’s or the
subsidiary’s retained earnings or income statement account.
b. Determine the consolidated net income for 2024, along with the Noncontrolling Interest in income
and the Controlling Interest in income.
2. This is independent of Problem 1. S is an 80% owned subsidiary of P, Inc. The following facts apply to
2024:
•
On January 1, 2024, S held $60,000 of merchandise sold to it from P.
•
P made sales to S during 2024 totaling $150,000.
•
On December 31, 2024, S had $80,000 of such goods purchased from P in its ending inventory.
•
P always sells to S at a 25% gross profit.
In 2024 P reported net income of $500,000 without including income from S. S reported net income of
$200,000. P accounts for S using the equity method.
Required:
a. From the foregoing information, prepare the required consolidation entries for the 2024
consolidated worksheet in general journal form. For any debit or credit to retained
earnings or to an income statement account, indicate whether it is the parent’s or the
subsidiary’s retained earnings or income statement account.
b. Determine the consolidated net income for 2024, along with the Noncontrolling Interest in
income and the Controlling Interest in income.
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