ACC Problem 8-6

problem 8-6 (LO 4) Worksheet, direct and indirect holding, intercompany merchandise, machine. The following diagram depicts the relationships among Mary Company, John Company, and Joan Company on December 31, 2014:MaryOwns 60%JohnOwns 40%JoanOwns 50%Mary Company purchases its interest in John Company on January 1, 2012, for $204,000.John Company purchases its interest in Joan Company on January 1, 2013, for $75,000. MaryCompany purchases its interest in Joan Company on January 1, 2014, for $72,000. All investments are accounted for under the equity method. Control over Joan Company does not occuruntil the January 1, 2014, acquisition. Thus, a D&D schedule will be prepared for the investment in Joan as of January 1, 2014.The following stockholders equities are available:JohnJoanCompanyDecember31,December 31201120122013Commonstock ($10par). ……….. ………… $150,000Commonstock ($10par). ……….. …………$100,000Paid-incapitalinexcess of par …………. …..Retained earnings ………………………..80,000Totalequity ……… ……….. …………$180,000$100,00075,00075,000$300,00050,000$150,000On January 2, 2014, Joan Company sells a machine to Mary Company for $20,000. The machine has a book value of $10,000, with an estimated life of ve years and is being depreciated on a straight-line basis.John Company sells $20,000 of merchandise to Joan Company during 2014 to realize a grossprot of 30%. Of this merchandise, $5,000 remains in Joan Companys December 31, 2014,inventory. Joan owes John $3,000 on December 31, 2014, for merchandise delivered during2014.Trial balances of the three companies prepared from general ledger account balances on December 31, 2014, are asfollows:MaryJohnJoanCash …………………. ……….. ……30,00062,50060,000Accounts Receivable ……………………… 200,00030,00055,000Inventory ………………. ……….. ……50,00080,000360,000Investmentin JohnCompany……….. …….. 270,000Investmentin JoanCompany……….. ………. 86,000107,500Property, Plant,andEquipment…. ……….. …2,250,000350,000850,000Accumulated Depreciation ……. ……….. …. (938,000)(121,800(377,500)MaryJohnJoanIntangibles…. ……….. ……….. ………15,000Accounts Payable …………… ……….. … (215,500)(22,000)(61,000)AccruedExpenses…………… ……….. … (12,000)(1,200)(4,000)BondsPayable. ……….. ……….. ………(100,000)(300,000)(500,000)Common Stock($5par) …………………… (500,000)Common Stock($10par) ………………….. (150,000)Common Stock($10par) ………………….. (100,000)Paid-In Capital inExcessof Par …… ……….. (700,000)(75,000)RetainedEarnings, January1, 2014…….. . (290,000)(80,000)(130,000)Sales .. ……….. ……………………..(300,000)Gainon SaleofEquipment ……… ……….. ..SubsidiaryIncome…………… ……….. …(1,800,000)(500,000)(10,000)(58,000)CostofGoods Sold ………….. ……….. …350,000180,0001,170,000OtherExpenses …………….. ……….. …100,00090,000525,000(20,000)Dividends Declared………….. ……….. …5,000Totals ……….. ……………………..0075,00015,0000Prepare the worksheet necessary to produce the consolidated financial statements of MaryCompany and its subsidiaries as of December 31, 2014. Include the determination and distribution of excess and income distribution schedules.Any excess of cost is assumed to be attributable to goodwill.