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Jones company acquired an 80% interest in Smith company at…

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Jones company acquired an 80%...
Jones company acquired an 80% interest in Smith company at the beginning of year 1 for $ 161000. The book value of the stock purchased was $140000. in negotiating the purchase price, it was agreed that the market value was justified in exceeding the book value because of the strong foothold in the market established by a newly launched product, Instant coffee. Competitive brands are now coming on the market, however, and management believes that the initial advantage gained by Smith's new product will be dissipated in the next five years. Any goodwill should be amortized over this period. During year 1, Jones sold to Smith merchandise for $85000 that cost $10000 and 20% of these goods are still in Smith's ending inventory. Jones uses the cost method to account for its investment in Smith. Minority interest will reflect the legal method. Required: a. Complete the accompanying work sheet, supplying notes to explain the entries. b. Prepare a statement of consolidated net income showing minority interest. JONES COMPANY Consolidating Work Sheet Year 1 End Account Title JonesComp. SmithComp. Eliminating Entries Consolidated Trial Balance Debit Credit Inventory $100,000 $50,000 Investment in- Smith Comp. 161,000 Dividend Receivable from Smith Company 2,400 Other Assets 242,600 150,000 Cost of Goods Sold 313,400 121,600 Operating Expenses 135,200 30,200 Income Taxes 18,400 7,200 Dividends Paid- Jones Company 15,000 Dividends Paid- Smith Company 6,000 Liabilities 96,500 41,000 Dividends Payable 7,500 3,000 Sales (495,200) (181,000) Dividend Income (4,800) Capital Stock- Jones Company (300,000) Capital Stock- Smith Company (100,000) Retained Earnings- Jones Company (84,000) Retained Earnings- Smith Company (40,000) Total 0 0 Also have the excel sheet just needs to be uploaded... willing to pay a bit more if someone can help me plz
Submitted: 8 years ago.Category: Business and Finance Homework
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Answered in 6 hours by:
7/7/2010
Business Tutor: conceptscoach,
 replied 8 years ago
conceptscoach
Category: Business and Finance Homework
Satisfied Customers: 437
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Hi Pepper,

 

The figure are a bit mixed up. Can you upload it in an excel file?

 

Thanks

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Customer reply replied 8 years ago
yes can u just tell me how to upload the file and i will get right on it im new at this not quite sure how!!! and thank you soo much for your reply i need all the help i can get
Customer reply replied 8 years ago
Heres my excel Sheet
And Also the Question
Customer reply replied 8 years ago
Relist: I still need help.
Customer reply replied 8 years ago
are you able to help me Conceptscoach??
Business Tutor: conceptscoach,
 replied 8 years ago

Sorry Pepper, I am not sure on a couple of things and hence I did opt out before, so that some other expert can assist you.

 

Thanks

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Customer reply replied 8 years ago
can you help me on the stuff that you do know? please any help will be great!
Customer reply replied 8 years ago
The first thing to do is to eliminate the investment and the equity accounts for Smith Co. Note that you will have to eliminate Excess of Acquisition, and the applicable goodwill amortization for the period if goodwill is amortized over five years.

You will have to eliminate the intercompany profit in the ending inventory. Calculate your gross profit and then eliminate 20%.

The intercompany dividend must be eliminated --remember that 20% is payable to outsiders so 80% is elimnated while the 20% remains to be paid to the outsiders by Jones.

You will have to compute minority interest by taking 20% of the equity of Smith. This has to be entered in the Eliminating Entries column so that it can be carried over to the Consolidated Balance. It serves as a balancing entry maintaining equality of debits and credits against the Investment, Equity, and Goodwill entries which eliminate the equity of Smith.
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