Justice Corporation paid $40,000 cash for an 80% interest in the voting common stock of Grace Corporation on July 1,2012,when Grace's stockholders' equity consisted of $30,000 of $10 par common stock and $15,000 retained earnings.The excess cost over the book value of the investment was assigned $2,000 to undervalued inventory items that were sold in 2012,with the remaining excess being assigned to goodwill.During the last half of 2012,Grace reported $4,000 net income and declared dividends of $2,000,and Justice reported income from Grace of $1,200.
There were no intercompany sales during the last half of 2012,but during 2013 Justice sold inventory items that cost $8,000 to Grace for $12,000.Half of these inventory items were included in Grace Corporation's Inventory at December 31,2013,with $1,000 unpaid by Grace at December 31,2013.
On January 5,2013,Justice sold a plant asset with a book value of $2,500 and a remaining useful life of 5 years to Grace for $4,000.Grace Corporation owned the plant asset at year-end.The plant asset has no salvage value and both companies use the straight-line depreciation method.
Justice Corporation uses the equity method to account for its investment in Grace,and the changes in Justice's Investment in Grace account from acquisition until year-end 2013 are as follows:
Required:
Complete the working papers for the year ending December 31,2013 that are given below.

Question

Justice Corporation paid $40,000 cash for an 80% interest in the voting common stock of Grace Corporation on July 1,2012,when Grace's stockholders' equity consisted of $30,000 of $10 par common stock and $15,000 retained earnings.The excess cost over the book value of the investment was assigned $2,000 to undervalued inventory items that were sold in 2012,with the remaining excess being assigned to goodwill.During the last half of 2012,Grace reported $4,000 net income and declared dividends of $2,000,and Justice reported income from Grace of $1,200.
There were no intercompany sales during the last half of 2012,but during 2013 Justice sold inventory items that cost $8,000 to Grace for $12,000.Half of these inventory items were included in Grace Corporation's Inventory at December 31,2013,with $1,000 unpaid by Grace at December 31,2013.
On January 5,2013,Justice sold a plant asset with a book value of $2,500 and a remaining useful life of 5 years to Grace for $4,000.Grace Corporation owned the plant asset at year-end.The plant asset has no salvage value and both companies use the straight-line depreciation method.
Justice Corporation uses the equity method to account for its investment in Grace,and the changes in Justice's Investment in Grace account from acquisition until year-end 2013 are as follows:
  Required:
Complete the working papers for the year ending December 31,2013 that are given below.

Quizplus · Accepted Answer

The Answer of Justice Corporation paid $40,000 cash for an 80% interest in the voting common stock of Grace Corporation on July 1,2012,when Grace's stockholders' equity consisted of $30,000 of $10 par common stock and $15,000 retained earnings.The excess cost over the book value of the investment was assigned $2,000 to undervalued inventory items that were sold in 2012,with the remaining excess being assigned to goodwill.During the last half of 2012,Grace reported $4,000 net income and declared dividends of $2,000,and Justice reported income from Grace of $1,200.
There were no intercompany sales during the last half of 2012,but during 2013 Justice sold inventory items that cost $8,000 to Grace for $12,000.Half of these inventory items were included in Grace Corporation's Inventory at December 31,2013,with $1,000 unpaid by Grace at December 31,2013.
On January 5,2013,Justice sold a plant asset with a book value of $2,500 and a remaining useful life of 5 years to Grace for $4,000.Grace Corporation owned the plant asset at year-end.The plant asset has no salvage value and both companies use the straight-line depreciation method.
Justice Corporation uses the equity method to account for its investment in Grace,and the changes in Justice's Investment in Grace account from acquisition until year-end 2013 are as follows:
  Required:
Complete the working papers for the year ending December 31,2013 that are given below.

Justice Corporation Paid $40,000 Cash for an 80% Interest in the Voting