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Consolidation 23. Foxx Corporation purchases all of the outstanding stock of Greenburg Company on January 1, 2005, for $600,000. Greenburg had net assets on that date of $470,000, although equipment with a 10-year life was undervalued on the records by $90,000. Any recognized goodwill is considered to have an indefinite life. Greenburg reports net income in 2005 of $90,000 and $100,000 in 2006. Dividends of $20,000 are paid by the subsidiary in each of these two years. Financial figures for the year ending December 31, 2007, follow. Credit balances are indicated by parentheses. Foxx Greenburg Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (800,000) $ (600,000) Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 150,000 Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . 300,000 350,000 Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,000) -0- Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (420,000) $ (100,000) Retained earnings, 1/1/07 . . . . . . . . . . . . . . . . . . . . . . $(1,100,000) $ (320,000) Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (420,000) (100,000) Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000 20,000 Retained earnings, 12/31/07 . . . . . . . . . . . . . . . . . . . . $(1,400,000) $ (400,000) Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 300,000 $ 100,000 Investment in subsidiary . . . . . . . . . . . . . . . . . . . . . . . 600,000 -0- Equipment (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 900,000 600,000 Buildings (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800,000 400,000 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000 100,000 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,200,000 $ 1,200,000 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (900,000) $ (500,000) Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (900,000) (300,000) Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,400,000) (400,000) Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . $(3,200,000) $(1,200,000) a. Determine the December 31, 2007, consolidated balance for each of the following accounts: Depreciation Expense Buildings Dividends Paid Goodwill Revenues Common Stock Equipment b. How does the parent's choice of an accounting method for its investment affect the balances computed in requirement (a)? Consolidation 23. Foxx Corporation purchases all of the outstanding stock of Greenburg Company on January 1, 2005, for $600,000. Greenburg had net assets on that date of $470,000, although equipment with a 10-year life was undervalued on the records by $90,000. Any recognized goodwill is considered to have an indefinite life. Greenburg reports net income in 2005 of $90,000 and $100,000 in 2006. Dividends of $20,000 are paid by the subsidiary in each of these two years. Financial figures for the year ending December 31, 2007, follow. Credit balances are indicated by parentheses. Foxx GreenburgRevenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (800,000) $ (600,000) Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 150,000 Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . 300,000 350,000 Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,000) -0- Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (420,000) $ (100,000) Retained earnings, 1/1/07 . . . . . . . . . . . . . . . . . . . . . . $(1,100,000) $ (320,000) Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (420,000) (100,000) Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000 20,000 Retained earnings, 12/31/07 . . . . . . . . . . . . . . . . . . . . $(1,400,000) $ (400,000) Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 300,000 $ 100,000 Investment in subsidiary . . . . . . . . . . . . . . . . . . . . . . . 600,000 -0- Equipment (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 900,000 600,000 Buildings (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800,000 400,000 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000 100,000 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,200,000 $ 1,200,000 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (900,000) $ (500,000) Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (900,000) (300,000) Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,400,000) (400,000) Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . $(3,200,000) $(1,200,000) a. Determine the December 31, 2007, consolidated balance for each of the following accounts: Depreciation Expense Buildings Dividends Paid Goodwill Revenues Common Stock Equipment b. How does the parent's choice of an accounting method for its investment affect the balances computed in requirement (a)?
What else can I help you with?
How do you set up intercompany Account?
To set up an intercompany account, first identify the entities involved in the transactions and determine the nature of the intercompany relationship. Create a dedicated general ledger account for intercompany transactions in each entity's accounting system to track these activities. Ensure that consistent accounting policies are applied across all entities for accurate reporting, and establish a process for reconciling intercompany balances to eliminate discrepancies. Finally, document the intercompany agreements and the terms of transactions for compliance and audit purposes.
Accounting adjustments for inter company trading?
When intercompany trading occurs, accounting adjustments need to be made to ensure accurate reporting. This typically involves eliminating intercompany sales and purchases, as well as any related profits or losses. Adjustments are made to the respective entities' financial statements to show the appropriate internal transfer of assets, liabilities, revenues, and expenses. This is done to avoid double-counting or misrepresentation of the financial position and results of the entities involved in the intercompany transactions.
What kind of transaction can not be done in accounting?
All kinds of transactions, everything, can be done in accounting, however, by virtue of certain limitations, prescribed by statutes, etc., not all transactions need be or should be done in accounting.
What type of account is intercompany?
An intercompany account is a type of account used in accounting to record transactions between two or more entities that are part of the same corporate group or parent company. These accounts help manage and track financial exchanges such as loans, sales, or services rendered between subsidiaries. Intercompany accounts are essential for consolidating financial statements and ensuring that transactions are accurately reflected in the overall financial position of the corporate group.
When do you use intercompany accounts?
To record transactions between related companies
What is a intercompany journals?
inter company journals are the journals passed in particular to describe the transactions between two entities.
What is the difference between branch accounting and inter company accounting?
The process of keeping track of all transactions within a corporation is known as " branch accounting." Branch accounting is crucial since it allows you to see how much money your firm has and what they're doing with it. Branch accounting is also useful for calculating taxes because it may demonstrate where profits come from. Source Url: Norwayoffice.biz Intercompany accounting, on the other hand, deals with cross-border transactions between corporations. If Company A purchases goods from Company B in another country, for example, Company A would.
Why intercompany transactions are eliminated?
If you dont' eliminate intercompany transactions it "grosses up" the income statement. So if you sold inventory in an intercomany transaction and then sold it to a third party you would count (most) of the sales revenue twice and (most) fo the COGS twice. By eliminating the transactions only the ultimate sales price and the entire groups COGS are reflected on the P&L. Similar analysis applies to other transactions.
What is trading partner field in SAP?
In SAP, the trading partner field is used to identify and manage business relationships between different entities within the same organization or between separate legal entities. This field is crucial for financial and accounting processes, as it helps in tracking intercompany transactions and consolidating financial statements. By assigning a trading partner to transactions, organizations can ensure accurate reporting and compliance with accounting standards.
What is recording phase of accounting?
Recording phase of accounting is to record the transactions into journal after transactions occured.
Importance of ICT in accounting profession?
The accounting transactions are recorded at a faster speed than in manual accounting systems,thus, more of information can be recorded in same time that it would have been done manually
What is inflationary accounting?
The branch of accounting which deals with the transactions of inflation.
