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Problem 7-7 Workpaper, Cost Method, Comprehensive Problem Parsons

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Problem 7-7 Workpaper, Cost Method, Comprehensive Problem
Parsons Company acquired 90% of the outstanding common stock of Shea Company on June 30, 2011, for $426,000. On that date, Shea Company had retained earnings in the amount of $60,000, and the fair value of its recorded assets and liabilities was equal to their book value. The excess of implied over the fair value of the recorded net assets was attributed to an unrecorded manufacturing formula held by Shea Company, which had an expected remaining useful life of five years from June 30, 2011.
Financial data for 2013 are presented here:
Parsons Company Shea Company
Sales $2,555,500 $1,120,000
Dividend Income 54,000 -0-
Total Revenue 2,609,500 1,120,000
Cost of Goods Sold 1,730,000 690,500
Expenses 654,500 251,000
Total Cost and Expenses 2,384,500 941,500
Net Income $ 225,000 $ 178,500
1/1 Retained Earnings $ 595,000 $ 139,500
Net Income 225,000 178,500
Dividends Declared (100,000) (60,000)
12/31 Retained Earnings $ 720,000 $ 258,000
Cash $ 119,500 $ 132,500
Inventory 362,000 201,000
Other Current Assets 40,500 13,000
Land 150,000 -0-
Investment in Shea Company 426,000 -0-
Property and Equipment 825,000 241,000
Accumulated Depreciation (207,000) (53,500)
Total Assets $2,058,000 $ 659,000
Accounts Payable $ 295,000 $ 32,000
Other Liabilities 43,000 19,000
Capital Stock 1,000,000 300,000
Additional Paid-in Capital -0- 50,000
Retained Earnings 720,000 258,000
Total Liabilities and Equity $2,058,000 $ 659,000
On December 31, 2011, Parsons Company sold equipment (with an original cost of $100,000 and accumulated depreciation of $50,000) to Shea Company for $97,500. This equipment has since been depreciated at an annual rate of 20% of the purchase price. During, 2012 Shea Company sold land to Parsons Company at a profit of $15,000.
The inventory of Persons Company on December 31, 2012, included goods purchased from Shea Company on which Shea Company recognized a profit of $7,500. During 2013, Shea sold goods to Parsons Company for $375,000, of which $60,000 was unpaid on December 31, 2013. The December 31, 2013, inventory of Persons Company included goods acquired from Shea Company on which Shea Company recognized a profit of $10,500.
Required:
A. Prepare a consolidated financial statement workpaper for the year ended December 31, 2013.
B. Prepare a schedule to calculate consolidated retained earnings on December 31, 2013, using an analytical or t-account approach. (Hint: Due to rounding, you may be out of balance by $1. To avoid this, you should carry decimal until the final calculation.)
Submitted: 2 years ago.
Category: Homework
Expert:  Neo replied 2 years ago.
Good day!

Please let me know the title, edition and name of the authors of the book you are using.

Thank you so much! :)

Customer: replied 2 years ago.

Advanced Accounting 4ed

Debra C. Jeaster, Paul K. Chaney

chapter 7

Expert:  Neo replied 2 years ago.
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Experience: BS Accounting
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