On January 1, 2016, Patrick Company purchased 60% of the common stock of Solomon Company for $180,000.On this date, Solomon had common stock, other paid-in capital, and retained earnings of $20,000, $60,000, and $120,000 respectively.
?
On January 1, 2016, the only tangible asset of Solomon that was undervalued was land, which was worth $15,000 more than book value.
?
On January 1, 2017, Patrick Company purchased an additional 30% of the common stock of Solomon Company for $140,000.
?
Net income and dividends for 2 years for Solomon Company were:
?
?
$$\begin{array} { l r r }
& 2016 & 2017 \
\text { Net income for year } & \$ 50,000 & \$ 80,000 \
\text { Dividends, paid-in December } & 0 & 50,000
\end{array}$$ In the last quarter of 2017, Solomon sold $80,000 of goods to Patrick, at a gross profit rate of 30%.On December 31, 2017, $20,000 of these goods are in Patrick's ending inventory.In both 2016 and 2017, Patrick has accounted for its investment in Solomon using the simple equity method.
?
Required:
?
a.Using the information from the scenario or on the separate worksheet, prepare necessary determination and distribution of excess schedules for the two purchases.?
?
b.Complete the Figure 7-2 worksheet for consolidated financial statements for 2017.?
?
?

Question

On January 1, 2016, Patrick Company purchased 60% of the common stock of Solomon Company for $180,000.On this date, Solomon had common stock, other paid-in capital, and retained earnings of $20,000, $60,000, and $120,000 respectively.
?
On January 1, 2016, the only tangible asset of Solomon that was undervalued was land, which was worth $15,000 more than book value.
?
On January 1, 2017, Patrick Company purchased an additional 30% of the common stock of Solomon Company for $140,000.
?
Net income and dividends for 2 years for Solomon Company were:
?
?
 $$\begin{array} { l r r } 
& 2016 & 2017 \
\text { Net income for year } & \$ 50,000 & \$ 80,000 \
\text { Dividends, paid-in December } & 0 & 50,000
\end{array}$$  In the last quarter of 2017, Solomon sold $80,000 of goods to Patrick, at a gross profit rate of 30%.On December 31, 2017, $20,000 of these goods are in Patrick's ending inventory.In both 2016 and 2017, Patrick has accounted for its investment in Solomon using the simple equity method.
?
Required:
? 
a.Using the information from the scenario or on the separate worksheet, prepare necessary determination and distribution of excess schedules for the two purchases.?
?
b.Complete the Figure 7-2 worksheet for consolidated financial statements for 2017.?
?
  ?

Quizplus · Accepted Answer

The Answer of On January 1, 2016, Patrick Company purchased 60% of the common stock of Solomon Company for $180,000.On this date, Solomon had common stock, other paid-in capital, and retained earnings of $20,000, $60,000, and $120,000 respectively.
?
On January 1, 2016, the only tangible asset of Solomon that was undervalued was land, which was worth $15,000 more than book value.
?
On January 1, 2017, Patrick Company purchased an additional 30% of the common stock of Solomon Company for $140,000.
?
Net income and dividends for 2 years for Solomon Company were:
?
?
 $$\begin{array} { l r r } 
& 2016 & 2017 \
\text { Net income for year } & \$ 50,000 & \$ 80,000 \
\text { Dividends, paid-in December } & 0 & 50,000
\end{array}$$  In the last quarter of 2017, Solomon sold $80,000 of goods to Patrick, at a gross profit rate of 30%.On December 31, 2017, $20,000 of these goods are in Patrick's ending inventory.In both 2016 and 2017, Patrick has accounted for its investment in Solomon using the simple equity method.
?
Required:
? 
a.Using the information from the scenario or on the separate worksheet, prepare necessary determination and distribution of excess schedules for the two purchases.?
?
b.Complete the Figure 7-2 worksheet for consolidated financial statements for 2017.?
?
  ?

On January 1, 2016, Patrick Company Purchased 60% of the Common