Prepare a determination and distribution of excess schedule

Sophisticated equity method, ?rst year, eliminations, state- ments. (Note: Read carefully, as this is not the same as Exercise 3.) Pepper Company acquires an 80% interest in Sultan Company for $250,000 on January 1, 20X1, when Sultan Company has the following balance sheet:

Assets

 

Liabilities and Equity

 

Current assets

$100,000

Current liabilities

$  50,000

Depreciable ?xed assets

200,000

Common stock ($10 par)

100,000

 

 

Retained earnings

150,000

Total assets

$300,000

Total liabilities and equity

$300,000

Any excess of the price paid over book value is attributable only to the ?xed assets, which have a 10-year remaining life. Pepper uses the sophisticated equity method to record the investment in Sultan Company.

The following trial balances of the two companies are prepared on December 31, 20X1:

 

Pepper

Sultan

Current Assets

60,000

130,000

Depreciable Fixed Assets

400,000

200,000

Accumulated Depreciation

(106,000)

(20,000)

Investment in Sultan Company

261,000

 

Current Liabilities

(60,000)

(40,000)

Common Stock ($10 par)

(300,000)

(100,000)

Retained Earnings, January 1, 20X1

(200,000)

(150,000)

Sales

(150,000)

(100,000)

Expenses

110,000

75,000

Subsidiary Income (from Sultan Company)

(15,000)

 

Dividends Declared

 

5,000

Totals

0

0

1. Prepare a determination and distribution of excess schedule for the investment (a value analysis is not needed).

2. Prepare all the eliminations and adjustments that would be made on the 20X1 consolidated worksheet.

3. Prepare the 20X1 consolidated income statement and its related income distribution schedule.

4. Prepare the 20X1 statement of retained earnings.

5. Prepare the 20X1 consolidated balance sheet.

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Financial Accounting: Prepare a determination and distribution of excess schedule
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