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Week2HomeworkExercises.xlsx

Instructions

This spreadsheet contains 16 individual worksheets that are to be completed as part of Homework #2. Please be sure to complete all 16 of them in order to earn full credit for the Excel portion of the homework.
On each of the six worksheets, enter the correct numbers in gray-shaded cells. When your answer is correct, that cell will change color to a light green. Do not copy formulas into cells – doing so will overwrite the conditional formatting that's used to make the cells change color when correct.
For guidance and instructions on how to work through these exercises, please be sure to go through the "Walk-Through Lecture" and "Practice Exercises" found in the Content section of Weeks #1 and #2. If you have questions, please post them up into the "Content & Homework Questions" forum for this week.
Exercises "1A 1B 1C", "2A 2B 2C", and "3A 3B 3C" represent three sets of a one company performing an acquisition of another. For each set, the "A" exercises are the journal entries made under an Asset Purchase, "B" exercises are the journal entries made under a Stock Purchase / Acquisition Method, and the "C" exercises represent the required entries for an Initial Consolidation if a Stock Purchase / Acquisition Method is done.
Exercises 4A, 4B, & 4C represent the journal entries that need to be made by the acquiring company and the selling company if the acquisition was made doing an Asset Purchase or a Stock Purchase using the issuance of stock on the part of the purchasing company to pay for the acquisition.
Exercises 5A, 5B, & 5C represents the journal entries that need to be made by the acquiring company to record income and dividend activities on the part of the acquired company.
Exercise 6 is a series of word-type problems similar to how questions relating to the material would be presented in multiple choice questions on our exams and the CPA exam.

1A Asset Purchase

Exercise 1A: Asset Purchase of Another Company
CheapBeer Inc. wants to purchase the net assets of FancyBrew Inc. for purposes of horizontal consolidation and will pay $750,000 cash for them. The balance sheet for FancyBrew Inc. on the date of purchase is as follows:
FancyBrew Inc.
Balance Sheet as of 7/1/20X1
Assets Liabilities & Owners' Equity
Book Value Fair Market Value Book Value Fair Market Value
Cash $0 $0 A/P $75,000 $75,000
A/R 60,000 50,000 Notes Payable 25,000 25,000
Inventory 75,000 80,000 Mortgage Payable 50,000 50,000
Net Fixed Assets 150,000 200,000 Total Liabilities: $150,000
Patents 0 25,000
Common Stock 50,000
Retained Earnings 85,000
Total Equity: $135,000
Total Assets: $285,000 Total Liabilities & O.E.: $285,000
A) Prepare the journal entry amounts for this asset acquisition on the books of CheapBeer Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.
Account Debits Credits
A/R
Inventory
Net Fixed Assets
Patents
Goodwill
Cash
A/P
Notes Payable
Mortgage Payable
Total $0 $0
B) Prepare the journal entry amounts for this asset acquisition on the books of FancyBrew Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.
Account Debits Credits
Cash
A/P
Notes Payable
Mortgage Payable
A/R
Inventory
Net Fixed Assets
Gain on Sale of Net Assets
Total $0 $0

1B Stock Purchase

Exercise 1B: Stock Purchase of Another Company
CheapBeer Inc. wants to purchase the net assets of FancyBrew Inc. for purposes of horizontal consolidation and will pay $750,000 cash for them. The balance sheet for FancyBrew Inc. on the date of purchase is as follows:
FancyBrew Inc.
Balance Sheet as of 7/1/20X1
Assets Liabilities & Owners' Equity
Book Value Fair Market Value Book Value Fair Market Value
Cash $0 $0 A/P $75,000 $75,000
A/R 60,000 50,000 Notes Payable 25,000 25,000
Inventory 75,000 80,000 Mortgage Payable 50,000 50,000
Net Fixed Assets 150,000 200,000 Total Liabilities: $150,000
Patents 0 25,000
Common Stock 50,000
Retained Earnings 85,000
Total Equity: $135,000
Total Assets: $285,000 Total Liabilities & O.E.: $285,000
A) Prepare the journal entry amounts for this stock purchase on the books of CheapBeer Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.
Account Debits Credits
Investment in FancyBrew Inc.
Cash
Total $0 $0
B) Note: There is NO journal entry made on the part of the acquired company as stock is purchased
from the shareholders, and NOT the acquired company!

1C Initial Consolidation

Exercise 1C: Initial Consolidation as of Date of Acquisition
CheapBeer Inc. purchased 100% of the outstanding stock of FancyBrew Inc. for purposes of horizontal consolidation and paid $750,000 cash for the stock. The balance sheets for the two companies immediately
after the acquisition are as follows:
FancyBrew Inc. CheapBeer Inc.
Balance Sheet as of 7/1/20X1 Balance Sheet as of 7/1/20X1
Assets Liabilities & Owners' Equity Assets Liabilities & Owners' Equity
Book Value Fair Market Value Book Value Fair Market Value Book Value Book Value
Cash $0 $0 A/P $75,000 $75,000 Cash $250,000 A/P $175,000
A/R 60,000 50,000 Notes Payable 25,000 25,000 A/R 175,000 Notes Payable 150,000
Inventory 75,000 80,000 Mortgage Payable 50,000 50,000 Inventory 350,000 Mortgage Payable 300,000
Net Fixed Assets 150,000 200,000 Total Liabilities: $150,000 Net Fixed Assets 200,000 Total Liabilities: $625,000
Patents 0 25,000 Investment in Subsidiary 750,000
Common Stock 50,000 Common Stock 250,000
Retained Earnings 85,000 Retained Earnings 850,000
Total Equity: $135,000 Total Equity: $1,100,000
Total Assets: $285,000 Total Liabilities & O.E.: $285,000 Total Assets: $1,725,000 Total Liabilities & O.E.: $1,725,000
A) Complete the below Consolidation Entries for the "Consolidation & Elimination Worksheet" for this acquisition as of the date of the acquisition by entering the proper debit and credit amounts in the gray-shaded cells below.
Trial Balances Combined Consolidation Entries Consolidated Balance
Account CheapBeer FancyBrew Entry Debit Entry Credit
Cash $250,000 $0 $250,000 Entry "A" Eliminate the subsidiary's equity against the parent's investment account
A/R 175,000 60,000 235,000 "B"
Inventory 350,000 75,000 425,000 "B"
Net Fixed Assets 200,000 150,000 350,000 "B"
Patents 0 0 0 "B" Entry "B" Adjust the net assets of the subsidiary to Fair Market Value and offset to the investment
Investment in Subsidiary 750,000 0 750,000 "A"
"B"
"C"
Goodwill 0 0 0 "C"
A/P (175,000) (75,000) (250,000) Entry "C" Any remaining amount in the investment account gets eliminated to Goodwill
Notes Payable (150,000) (25,000) (175,000)
Mortgage Payable (300,000) (50,000) (350,000)
Common Stock – CheapBeer (250,000) (250,000)
Common Stock – FancyBrew (50,000) (50,000) "A"
Retained Earnings – CheapBeer (850,000) (850,000)
Retained Earnings – FancyBrew (85,000) (85,000) "A"
Totals $0 $0 $0 $0 $0 $0

2A Asset Purchase

Exercise 2A: Asset Purchase of Another Company
HotSauce Inc. wants to purchase the net assets of AuntyAcid Inc. for purposes of horizontal consolidation and will pay $850,000 cash for them. The balance sheet for AuntyAcid Inc. on the date of purchase is as follows:
AuntyAcid Inc.
Balance Sheet as of 3/31/20X1
Assets Liabilities & Owners' Equity
Book Value Fair Market Value Book Value Fair Market Value
Cash $0 $0 A/P $75,000 $75,000
A/R 100,000 95,000 Notes Payable 125,000 125,000
Inventory 250,000 275,000 Mortgage Payable 150,000 120,000
Net Fixed Assets 250,000 350,000 Total Liabilities: $350,000
Patents 0 100,000
Common Stock 200,000
Retained Earnings 50,000
Total Equity: $250,000
Total Assets: $600,000 Total Liabilities & O.E.: $600,000
A) Prepare the journal entry amounts for this asset acquisition on the books of HotSauce Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.
Account Debits Credits
A/R
Inventory
Net Fixed Assets
Patents
Goodwill
Cash
A/P
Notes Payable
Mortgage Payable
Total $0 $0
B) Prepare the journal entry amounts for this asset acquisition on the books of AuntyAcid Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.
Account Debits Credits
Cash
A/P
Notes Payable
Mortgage Payable
A/R
Inventory
Net Fixed Assets
Gain on Sale of Net Assets
Total $0 $0

2B Stock Purchase

Exercise 2B: Stock Purchase of Another Company
HotSauce Inc. wants to purchase the net assets of AuntyAcid Inc. for purposes of horizontal consolidation and will pay $850,000 cash for them. The balance sheet for AuntyAcid Inc. on the date of purchase is as follows:
AuntyAcid Inc.
Balance Sheet as of 3/31/20X1
Assets Liabilities & Owners' Equity
Book Value Fair Market Value Book Value Fair Market Value
Cash $0 $0 A/P $75,000 $75,000
A/R 100,000 95,000 Notes Payable 125,000 125,000
Inventory 250,000 275,000 Mortgage Payable 150,000 120,000
Net Fixed Assets 250,000 350,000 Total Liabilities: $350,000
Patents 0 100,000
Common Stock 200,000
Retained Earnings 50,000
Total Equity: $250,000
Total Assets: $600,000 Total Liabilities & O.E.: $600,000
A) Prepare the journal entry amounts for this stock purchase on the books of HotSauce Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.
Account Debits Credits
Investment in AuntyAcid Inc.
Cash
Total $0 $0
B) Note: There is NO journal entry made on the part of the acquired company as stock is purchased
from the shareholders, and NOT the acquired company!

2C Initial Consolidation

Exercise 2C: Initial Consolidation as of Date of Acquisition
HotSauce Inc. purchased AuntyAcid Inc. for purposes of horizontal consolidation and paid $850,000 cash for 100% of their outstanding stock. The balance sheets for the two companies immediately after the acquisition are as follows:
AuntyAcid Inc. HotSauce Inc.
Balance Sheet as of 3/31/20X1 Balance Sheet as of 3/31/20X1
Assets Liabilities & Owners' Equity Assets Liabilities & Owners' Equity
Book Value Fair Market Value Book Value Fair Market Value Book Value Book Value
Cash $0 $0 A/P $75,000 $75,000 Cash $500,000 A/P $100,000
A/R 100,000 95,000 Notes Payable 125,000 125,000 A/R 150,000 Notes Payable 50,000
Inventory 250,000 275,000 Mortgage Payable 150,000 120,000 Inventory 400,000 Mortgage Payable 500,000
Net Fixed Assets 250,000 350,000 Total Liabilities: $350,000 Net Fixed Assets 300,000 Total Liabilities: $650,000
Patents 0 100,000 Investment in Subsidiary 850,000
Common Stock 200,000 Common Stock 750,000
Retained Earnings 50,000 Retained Earnings 800,000
Total Equity: $250,000 Total Equity: $1,550,000
Total Assets: $600,000 Total Liabilities & O.E.: $600,000 Total Assets: $2,200,000 Total Liabilities & O.E.: $2,200,000
A) Complete the below Consolidation Entries for the "Consolidation & Elimination Worksheet" for this acquisition as of the date of the acquisition by entering the proper debit and credit amounts in the gray-shaded cells below.
Trial Balances Combined Consolidation Entries Consolidated Balance
Account HotSauce AuntyAcid Entry Debit Entry Credit Entry "A" Eliminate the subsidiary's equity against the parent's investment account
Cash $500,000 $0 $500,000
A/R 150,000 100,000 250,000 "B"
Inventory 400,000 250,000 650,000 "B"
Net Fixed Assets 300,000 250,000 550,000 "B" Entry "B" Adjust the net assets of the subsidiary to Fair Market Value and offset to the investment
Patents 0 0 0 "B"
Investment in Subsidiary 850,000 0 850,000 "A"
"B"
"C"
Goodwill 0 0 0 "C" Entry "C" Any remaining amount in the investment account gets eliminated to Goodwill
A/P (100,000) (75,000) (175,000)
Notes Payable (50,000) (125,000) (175,000)
Mortgage Payable (500,000) (150,000) (650,000) "B"
Common Stock – HotSauce (750,000) (750,000)
Common Stock – AuntyAcid (200,000) (200,000) "A"
Retained Earnings – HotSauce (800,000) (800,000)
Retained Earnings – AuntyAcid (50,000) (50,000) "A"
Totals $0 $0 $0 $0 $0 $0

3A Asset Purchase

Exercise 3A: Asset Purchase of Another Company
MarshaMarshaMarsha Inc. wants to purchase the net assets of OhMyNose Inc. for purposes of horizontal consolidation and will pay $2,000,000 cash for them. The balance sheet for OhMyNose Inc. on the date of purchase is as follows:
OhMyNose Inc.
Balance Sheet as of 9/15/20X1
Assets Liabilities & Owners' Equity
Book Value Fair Market Value Book Value Fair Market Value
Cash $0 $0 A/P $250,000 $250,000
A/R 250,000 250,000 Notes Payable 50,000 50,000
Inventory 150,000 150,000 Bonds Payable 500,000 450,000
Net Fixed Assets 500,000 1,000,000 Total Liabilities: $800,000
Trademarks 100,000 500,000
Common Stock 25,000
Retained Earnings 175,000
Total Equity: $200,000
Total Assets: $1,000,000 Total Liabilities & O.E.: $1,000,000
A) Prepare the journal entry amounts for this asset acquisition on the books of MarshaMarshaMarsha Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.
Account Debits Credits
A/R
Inventory
Net Fixed Assets
Trademarks
Goodwill
Cash
A/P
Notes Payable
Bonds Payable
Total $0 $0
B) Prepare the journal entry amounts for this asset acquisition on the books of OhMyNose Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.
Account Debits Credits
Cash
A/P
Notes Payable
Bonds Payable
A/R
Inventory
Net Fixed Assets
Trademarks
Gain on Sale of Net Assets
Total $0 $0

3B Stock Purchase

Exercise 3B: Stock Purchase of Another Company
MarshaMarshaMarsha Inc. wants to purchase the net assets of OhMyNose Inc. for purposes of horizontal consolidation and will pay $2,000,000 cash for them. The balance sheet for OhMyNose Inc. on the date of purchase is as follows:
OhMyNose Inc.
Balance Sheet as of 9/15/20X1
Assets Liabilities & Owners' Equity
Book Value Fair Market Value Book Value Fair Market Value
Cash $0 $0 A/P $250,000 $250,000
A/R 250,000 250,000 Notes Payable 50,000 50,000
Inventory 150,000 150,000 Bonds Payable 500,000 450,000
Net Fixed Assets 500,000 1,000,000 Total Liabilities: $800,000
Trademarks 100,000 500,000
Common Stock 25,000
Retained Earnings 175,000
Total Equity: $200,000
Total Assets: $1,000,000 Total Liabilities & O.E.: $1,000,000
A) Prepare the journal entry amounts for this asset acquisition on the books of MarshaMarshaMarsha Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.
Account Debits Credits
Investment in OhMyNose Inc.
Cash
Total $0 $0
B) Note: There is NO journal entry made on the part of the acquired company as stock is purchased
from the shareholders, and NOT the acquired company!

3C Initial Consolidation

Exercise 3C: Initial Consolidation as of Date of Acquisition
MarshaMarshaMarsha Inc. purchased 100% of the outstanding stock of OhMyNose Inc. for purposes of horizontal consolidation and paid $2,000,000 cash for the stock. The balance sheets for the two companies immediately
after the acquisition are as follows:
OhMyNose Inc. MarshaMarshaMarsha Inc.
Balance Sheet as of 9/15/20X1 Balance Sheet as of 9/15/20X1
Assets Liabilities & Owners' Equity Assets Liabilities & Owners' Equity
Book Value Fair Market Value Book Value Fair Market Value Book Value Book Value
Cash $0 $0 A/P $250,000 $250,000 Cash $750,000 A/P $1,000,000
A/R 250,000 250,000 Notes Payable 50,000 50,000 A/R 500,000 Notes Payable 250,000
Inventory 150,000 150,000 Bonds Payable 500,000 450,000 Inventory 600,000 Mortgage Payable 1,500,000
Net Fixed Assets 500,000 1,000,000 Total Liabilities: $800,000 Net Fixed Assets 2,500,000 Total Liabilities: $2,750,000
Trademarks 100,000 500,000 Investment in Subsidiary 2,000,000
Common Stock 25,000 Common Stock 500,000
Retained Earnings 175,000 Retained Earnings 3,100,000
Total Equity: $200,000 Total Equity: $3,600,000
Total Assets: $1,000,000 Total Liabilities & O.E.: $1,000,000 Total Assets: $6,350,000 Total Liabilities & O.E.: $6,350,000
A) Complete the below Consolidation Entries for the "Consolidation & Elimination Worksheet" for this acquisition as of the date of the acquisition by entering the proper debit and credit amounts in the gray-shaded cells below.
Trial Balances Combined Consolidation Entries Consolidated Balance
Account Marsha(3) OhMyNose Entry Debit Entry Credit
Cash $750,000 $0 $750,000 Entry "A" Eliminate the subsidiary's equity against the parent's investment account
A/R 500,000 250,000 750,000
Inventory 600,000 150,000 750,000
Net Fixed Assets 2,500,000 500,000 3,000,000 "B"
Trademarks 0 100,000 100,000 "B" Entry "B" Adjust the net assets of the subsidiary to Fair Market Value and offset to the investment
Investment in Subsidiary 2,000,000 0 2,000,000 "A"
"B"
"C"
Goodwill 0 0 0 "C"
A/P (1,000,000) (250,000) (1,250,000) Entry "C" Any remaining amount in the investment account gets eliminated to Goodwill
Notes Payable (250,000) (50,000) (300,000)
Bonds Payable 0 (500,000) (500,000) "B"
Mortgage Payable (1,500,000) 0 (1,500,000)
Common Stock – Marsha(3) (500,000) (500,000)
Common Stock – OhMyNose (25,000) (25,000) "A"
Retained Earnings – Marsha(3) (3,100,000) (3,100,000)
Retained Earnings – OhMyNose (175,000) (175,000) "A"
Totals $0 $0 $0 $0 $0 $0

4A Issuing Stock

Exercise 4A: Asset Purchase v Stock Purchase with Issuing Stock for Payment
Ginger Inc. is thinking about undertaking vertical integration by taking over the functions performed by one of their suppliers, Skipper Inc. Ginger can either buy the net assets of, or 100% of the outstanding stock of Skipper for $800,000 plus $50,000 in direct acquisition costs. Below is financial information for Skipper as of 12/31/20X1:
Skipper, Inc.
Balance Sheet as of 12/31/20X1
Assets Book FMV Liabilities Book FMV
Cash $ – $ – A/P $ 50,000 $ 50,000
A/R 500,000 475,000 Notes Payable 150,000 150,000
Inventory 250,000 250,000 Bonds Payable 200,000 200,000
Trademark – 50,000
Net Fixed Assets 250,000 300,000 Equity 600,000
Total Assets $ 1,000,000 Total Liabilities & O.E. $ 1,000,000
A) Complete the journal entry made by Ginger to account for an asset purchase of Skipper on 12/31/20X1 by entering the proper amounts in the gray-shaded cells. Ginger paid for the purchase price by issuing 20,000 shares of its stock which had a market value of $40 per share and a Par Value of $5 per share. When the correct amount is entered, the cell will change color:
Account Debit Credit
Accounts Receivable
Inventory
Trademark
Net Fixed Assets
Goodwill
Acquisition Expenses
A/P
Notes Payable
Bonds Payable
Common Stock at Par
APIC, Common Stock
Cash
0 0
B) Complete the journal entry made by Skipper to account for the asset purchase by Ginger on 12/31/20X1 by entering the proper amounts in the gray-shaded cells. When the correct amount is entered, the cell will change color:
Account Debit Credit
Marketable Securities in Ginger, Inc.
A/P
Notes Payable
Bonds Payable
A/R
Inventory
Net Fixed Assets
Gain on Sale
0 0
C) Complete the journal entry made by Ginger to account for a stock purchase of Skipper on 12/31/20X1 by entering the proper amounts in the gray-shaded cells. Ginger paid for the purchase price by issuing 20,000 shares of its stock which had a market value of $40 per share and a Par Value of $5 per share. When the correct amount is entered, the cell will change color:
Account Debit Credit
Investment in Skipper
Acquisition Expenses
Common Stock at Par
APIC, Common Stock
Cash
0 0

4B Issuing Stock

Exercise 4B: Asset Purchase v Stock Purchase with Issuing Stock for Payment
Howell Inc. is thinking about undertaking vertical integration by taking over the functions performed by one of their suppliers, Thurston Inc. Howell can either buy the net assets of, or 100% of the outstanding stock of Thurston for $1,000,000 plus $25,000 in direct acquisition costs. Below is financial information for Thurston as of 5/15/20X1:
Thurston, Inc.
Balance Sheet as of 5/15/20X1
Assets Book FMV Liabilities Book FMV
Cash $ – $ – A/P $ 500,000 $ 500,000
A/R 1,500,000 1,400,000 Notes Payable 500,000 500,000
Inventory 750,000 750,000 Bonds Payable 1,500,000 1,500,000
Patent – 50,000
Net Fixed Assets 1,000,000 500,000 Equity 750,000
Total Assets $ 3,250,000 Total Liabilities & O.E. $ 3,250,000
A) Complete the journal entry made by Howell to account for an asset purchase of Thurston on 5/15/20X1 by entering the proper amounts in the gray-shaded cells. Howell paid for the purchase price by issuing 100,000 shares of its stock which had a market value of $10 per share and a Par Value of $1 per share. When the correct amount is entered, the cell will change color:
Account Debit Credit
Accounts Receivable
Inventory
Patent
Net Fixed Assets
Goodwill
Acquisition Expenses
A/P
Notes Payable
Bonds Payable
Common Stock at Par
APIC, Common Stock
Cash
0 0
B) Complete the journal entry made by Thurston to account for the asset purchase by Howell on 5/15/20X1 by entering the proper amounts in the gray-shaded cells. When the correct amount is entered, the cell will change color:
Account Debit Credit
Marketable Securities in Howell, Inc.
A/P
Notes Payable
Bonds Payable
A/R
Inventory
Net Fixed Assets
Gain on Sale
0 0
C) Complete the journal entry made by Howell to account for a stock purchase of Thurston on 5/15/20X1 by entering the proper amounts in the gray-shaded cells. Howell paid for the purchase price by issuing 100,000 shares of its stock which had a market value of $10 per share and a Par Value of $1 per share. When the correct amount is entered, the cell will change color:
Account Debit Credit
Investment in Thurston
Acquisition Expenses
Common Stock at Par
APIC, Common Stock
Cash
0 0

4C Issuing Stock

Exercise 4C: Asset Purchase v Stock Purchase with Issuing Stock for Payment
Genie Inc. is thinking about undertaking vertical integration by taking over the functions performed by one of their suppliers, Rogers Inc. Genie can either buy the net assets of, or 100% of the outstanding stock of Rogers for $500,000 plus $10,000 in direct acquisition costs. Below is financial information for Rogers as of 7/1/20X1:
Rogers, Inc.
Balance Sheet as of 7/1/20X1
Assets Book FMV Liabilities Book FMV
Cash $ – $ – A/P $ 25,000 $ 25,000
A/R 100,000 75,000 Accrued Expenses 75,000 75,000
Inventory 50,000 50,000
Trademark – 25,000
Net Fixed Assets 550,000 300,000 Equity 600,000
Total Assets $ 700,000 Total Liabilities & O.E. $ 700,000
A) Complete the journal entry made by Genie to account for an asset purchase of Rogers on 7/1/20X1 by entering the proper amounts in the gray-shaded cells. Genie paid for the purchase price by issuing 10,000 shares of its stock which had a market value of $50 per share and a Par Value of $5 per share. When the correct amount is entered, the cell will change color:
Account Debit Credit
Accounts Receivable
Inventory
Trademark
Net Fixed Assets
Goodwill
Acquisition Expenses
A/P
Accrued Expenses
Common Stock at Par
APIC, Common Stock
Cash
0 0
B) Complete the journal entry made by Rogers to account for the asset purchase by Genie on 7/1/20X1 by entering the proper amounts in the gray-shaded cells. When the correct amount is entered, the cell will change color:
Account Debit Credit
Marketable Securities in Genie, Inc.
A/P
Accrued Expenses
Loss on Sale of Net Assets
A/R
Inventory
Net Fixed Assets
0 0
C) Complete the journal entry made by Genie to account for a stock purchase of Rogers on 7/1/20X1 by entering the proper amounts in the gray-shaded cells. Genie paid for the purchase price by issuing 10,000 shares of its stock which had a market value of $50 per share and a Par Value of $5 per share. When the correct amount is entered, the cell will change color:
Account Debit Credit
Investment in Rogers
Acquisition Expenses
Common Stock at Par
APIC, Common Stock
Cash
0 0

5A Income of Subsidiary

Exercise 5A: Accounting for the Income of a Subsidiary
Meat Wad Inc., who is 100% owned by Frylock Inc., reports the following income and dividend results for 202X:
Net Income; 1st Quarter (3/31) $75,000 Net Income; 3rd Quarter (9/30) $50,000
Dividend Declared (5/16) $20,000 Dividend Declared (12/20) $25,000
Net Income; 2nd Quarter (6/30) $40,000 Net Income; 4th Quarter (12/31) $75,000
A) Record the 202X journal entries made by Frylock to account for the income / dividends of Meat Wad using the Cost Method of accounting for the income of a subsidiary by entering the proper amounts in the gray-shaded cells. When the correct amount is entered, the cell will change color:
Date Account Debit Credit
5/16/202X Dividends Receivable
Investment Income
12/20/202X Dividends Receivable
Investment Income
B) Record the 202X journal entries made by Frylock to account for the income / dividends of Meat Wad using the Simple Equity Method of accounting for the income of a subsidiary by entering the proper amounts in the gray-shaded cells. When the correct amount is entered, the cell will change color:
Date Account Debit Credit
3/31/202X Investment in Meat Wad
Investment Income
5/16/202X Dividends Receivable
Investment in Meat Wad
6/30/202X Investment in Meat Wad
Investment Income
9/30/202X Investment in Meat Wad
Investment Income
12/20/202X Dividends Receivable
Investment in Meat Wad
12/31/202X Investment in Meat Wad
Investment Income

5B Income of Subsidiary

Exercise 5B: Accounting for the Income of a Subsidiary
Meat Wad Inc., who is 100% owned by Frylock Inc., reports the following income and dividend results for 202X:
Net Income; 1st Quarter (3/31) $150,000 Net Income; 3rd Quarter (9/30) $30,000
Dividend Declared (5/16) $15,000 Dividend Declared (12/20) $5,000
Net Loss; 2nd Quarter (6/30) ($25,000) Net Income; 4th Quarter (12/31) $75,000
A) Record the 202X journal entries made by Frylock to account for the income / dividends of Meat Wad using the Cost Method of accounting for the income of a subsidiary by entering the proper amounts in the gray-shaded cells. When the correct amount is entered, the cell will change color:
Date Account Debit Credit
5/16/202X Dividends Receivable
Investment Income
12/20/202X Dividends Receivable
Investment Income
B) Record the 202X journal entries made by Frylock to account for the income / dividends of Meat Wad using the Simple Equity Method of accounting for the income of a subsidiary by entering the proper amounts in the gray-shaded cells. When the correct amount is entered, the cell will change color:
Date Account Debit Credit
3/31/202X Investment in Meat Wad
Investment Income
5/16/202X Dividends Receivable
Investment in Meat Wad
6/30/202X Investment Loss
Investment in Meat Wad
9/30/202X Investment in Meat Wad
Investment Income
12/20/202X Dividends Receivable
Investment in Meat Wad
12/31/202X Investment in Meat Wad
Investment Income

5C Income of Subsidiary

Exercise 5C: Accounting for the Income of a Subsidiary
Meat Wad Inc., who is 100% owned by Frylock Inc., reports the following income and dividend results for 202X:
Dividend Declared (1/20) $30,000 Dividend Declared (7/20) $10,000
Net Income; 1st Quarter (3/31) $60,000 Net Loss; 3rd Quarter (9/30) ($15,000)
Dividend Declared (4/20) $25,000 Dividend Declared (10/20) $5,000
Net Loss; 2nd Quarter (6/30) ($30,000) Net Income; 4th Quarter (12/31) $125,000
A) Record the 202X journal entries made by Frylock to account for the income / dividends of Meat Wad using the Cost Method of accounting for the income of a subsidiary by selecting the proper account to be debited or credited using the drop down menu, and then entering the proper amounts in the gray-shaded cells. When the correct account is selected and the correct amount is entered, the cell will change color:
Date Account Debit Credit
1/20/202X
Dividends Receivable
Investment in Meat Wad
4/20/202X Investment Income
Investment Loss
7/20/202X
10/20/202X
B) Record the 2020 journal entries made by Frylock to account for the income / dividends of Meat Wad using the Simple Equity Method of accounting for the income of a subsidiary by selecting the proper account to be debited or credited using the drop down menu, and then entering the proper amounts in the gray-shaded cells. When the correct account is selected and the correct amount is entered, the cell will change color:
Date Account Debit Credit
1/20/202X
3/31/202X
4/20/202X
6/30/202X
7/20/202X
9/30/202X
10/20/202X
12/31/202X

6 Word Problems

Below are several "word type" problems that are written in the manner / style one will expect to see on both our exams and the CPA exam when it comes to certain aspects of the material we're covering. These types of questions require you to understand what is being asked for, identify the relevant information in the question, and determine the correct answer. In a multiple-choice question, which is what you will see on our exams and a portion of the CPA exam, you will have a number of choices to choose from, including of course the correct answer. For our purposes, you're being asked to figure out the correct answer and enter accordingly per instructions below. Note: These are not intended to be an exam review.
For each of the below, follow the instructions and when answers are correct, the gray-shaded cells will turn green.
1) Company A owns all of the stock of Company B, and uses the Simple Equity Method to account for the net income of Company B. On 3/31/2X, Company B reported Net Income of $100,000. The entry made to account for this by Company A will be:
Select Proper Debit Account Using Drop-Down Menu Enter Debit Amount Select Proper Credit Account Using Drop-Down Menu Enter Credit Amount
Cash
Dividends Receivable
2) Company A owns all of the stock of Company B, and uses the Simple Equity Method to account for the net income of Company B. On 7/31/2X, Company B declared a dividend of $50,000. The entry made to account for this by Company A will be: Goodwill
Investment
Select Proper Debit Account Using Drop-Down Menu Enter Debit Amount Select Proper Credit Account Using Drop-Down Menu Enter Credit Amount Investment Income
3) On that date that it was acquired 100% by Company A, Company B has total assets with a BV of $500,000 and a FMV of $600,000, and total liabilities with a BV of $100,000 and a FMV of $50,000. If Company A paid $650,000 for 100% of Company B's outstanding stock, how much Goodwill will Company A recognize when booking this transaction?
Enter the amount of Goodwill to be booked Here –>
4) In a direct purchase, Company B sold all its assets and liabilities to Company A for $500,000. At the time of the sale, the BV of Company B's assets was $200,000 and the FMV was $800,000, and BV and FMV of liabilities was $50,000. the amount of gain or loss recognized by Company B from this transaction would be:
Select Gain or Loss Enter Amount
. Gain
Loss