On January 1, 2018, Paul Company purchased 80% of the common stock of Smith Company for $300,000.On this date Smith had total owners' equity of $350,000.Any excess of cost over book value is attributed to a patent, to be amortized over 10 years.
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During 2018, Paul has accounted for its investment in Smith using the simple equity method.
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During 2018, Paul sold merchandise to Smith for $50,000, of which $10,000 is held by Smith on December 31, 2018.Paul's gross profit on sales is 40%.
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During 2018, Smith sold some land to Paul at a gain of $10,000.Paul still holds the land at year end.
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Paul and Smith qualify as an affiliated group for tax purposes and thus will file a consolidated tax return.Assume a 30% corporate income tax rate.
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Required:
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Complete the Figure 6-11 worksheet for consolidated financial statements for the year ended December 31, 2018.
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?
?
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Question

On January 1, 2018, Paul Company purchased 80% of the common stock of Smith Company for $300,000.On this date Smith had total owners' equity of $350,000.Any excess of cost over book value is attributed to a patent, to be amortized over 10 years.
?
During 2018, Paul has accounted for its investment in Smith using the simple equity method.
?
During 2018, Paul sold merchandise to Smith for $50,000, of which $10,000 is held by Smith on December 31, 2018.Paul's gross profit on sales is 40%.
?
During 2018, Smith sold some land to Paul at a gain of $10,000.Paul still holds the land at year end.
?
Paul and Smith qualify as an affiliated group for tax purposes and thus will file a consolidated tax return.Assume a 30% corporate income tax rate.
?
Required:
?
Complete the Figure 6-11 worksheet for consolidated financial statements for the year ended December 31, 2018.
?
?
  ?
?

Quizplus · Accepted Answer

The Answer of On January 1, 2018, Paul Company purchased 80% of the common stock of Smith Company for $300,000.On this date Smith had total owners' equity of $350,000.Any excess of cost over book value is attributed to a patent, to be amortized over 10 years.
?
During 2018, Paul has accounted for its investment in Smith using the simple equity method.
?
During 2018, Paul sold merchandise to Smith for $50,000, of which $10,000 is held by Smith on December 31, 2018.Paul's gross profit on sales is 40%.
?
During 2018, Smith sold some land to Paul at a gain of $10,000.Paul still holds the land at year end.
?
Paul and Smith qualify as an affiliated group for tax purposes and thus will file a consolidated tax return.Assume a 30% corporate income tax rate.
?
Required:
?
Complete the Figure 6-11 worksheet for consolidated financial statements for the year ended December 31, 2018.
?
?
  ?
?

On January 1, 2018, Paul Company Purchased 80% of the Common