KELOMPOK 3

Syifa Firda Rana (4.44.17.1.23)

Wiji Agustin N.G (4.44.17.1.25)
Wijiyanti (4.44.17.1.26)

P2-2
Journal entries for midyear investment (cost and aquty method)
Put Company paid $ 220.000 for an 80 percent interest in Sel Company on July 1,2011, when sel Company had tota
equity of $ 110.000. Sel Company reported earnings of $ 10.000 for 2011 and declared dividends of $ 16.000 on
November 1, 2011
REQUIRED : Give the entries to record these facts on the books of Put Company :
1. Assuming that Put Company uses the cost method of accounting for its subsidiaries.
2. Assuming that Put Company uses the equity method of accounting fot its subsidiaries.
(Any difference between investment cost and book value acquired is to be assigned to equipment and
amortized over a 10-year period).

P2-6
Interim Acquisition
On march 31, 2014, Wero CA purchased Javier CA's 30 percent interest by paying $ 450.000 cash. The book value o
Javier CA's assets and liabilities were equal to the fair values at the acquisition date, except for inventories that
were overvalued by $ 100.000, and equipment (6 years remaining useful life) that was undervalued by $ 300.000.
The shareholders' equity of Javier CA, on january 1, was $ 1.200,000. Javier CA reported net income of $100.000
for the year, and declared $ 50.000 dividend on July 1
REQUIRED :
1. Prepare the schedule to allocate the investment fair values/book values differentials relating to Wero CA's
investment in Javier CA's.
2. Prepare on all necessary journal entries for Wero CA in 2014
3. Determine investment in Javier CA balance at December 31, 2014

P2-7
Partial Income statement with an extraordinary item
Dil Corporation acquired 30% of the voting stock of Lar Company at book value on July 1, 2011.
During 2013, Lar paid dividend of $ 80.000 and reported income of $ 250.000 as follows :
Income before extraordinary item $ 150,000
Extraordinary gain (tax credit from operating loss carryforward) $ 100,000
Net income $ 250,000
REQUIRED :
Show how Dil's income from Lar should be reported for 2013 by means of a partial income statement for Dil
Corporation.
 P2-2

1. Cost method
Investment in Sel July 1, 2011 (at cost) $ 220,000
Deduct: Dividends charged to investment $ 8,800
Investment in Sel balance at December 31, 2011 $ 211,200

Date Account Name Debit Credit

7/1/2011 Investment in Sel $ 220,000
Cash $ 220,000
(To record initial investment for 80% interest)

11/1/2011 Cash $ 12,800

Dividend income $ 12,800
(To record receipt of dividends)

12/31/2011 Dividend Income $ 8,800

Investment in Sel $ 8,800
(To reduce investment for dividend in excess of earnings)

2. Equity Method
Investment in Sel Juy 1, 2011 $ 220,000
Sel's Book Value $ 88,000
Excess depreciation $ 132,000
$ 13,200 a year
1 July - 31 December 2011 $ 6,600

Investment in Sel July 1, 2011 $ 220,000

Add : Share of repoted income $ 4,000
Deduct : Devidends charged to investment $ 12,800
Deduct : Excess depreciation $ 6,600
Investment in Sel balance at december 31,2011 $ 204,600

Date Account Name Debit Credit

7/1/2011 Investment in Sel $ 220,000
Cash $ 220,000
(To record initial investment for 80% interest)

11/1/2011 Cash $ 12,800

Investment in Sel $ 12,800
(To record receipt of dividends)

12/31/2011 Income from Sel $ 2,600

Investment in Sel $ 2,600
(To record income from Sel )
 P2-6

1. Javier CA's net assets at January 1 $ 1,200,000

Income for the first quarted $ 25,000
Javier CA's net assets at March 31 $ 1,225,000

Wero CA and its 40% owned equity investee, Javier CA

Investment in Javier CA $ 450,000
Book value of the interset acquired $ 367,500
Excess of cost over book value acquired $ 82,500

Undervalued % interest Amount

x =
(overvalued) Acquired Assigned
Inventory $ -100,000 30% $ -30,000
Equipment net $ 300,000 30% $ 90,000
Total assigned to identifiable net assets $ 60,000
Reminder assigned to goodwill $ 22,500
Total excess of cost over book value acquired $ 82,500

2. Journal entries in Wero CA book :

Date Account Name Debit Credit
March 31 Investment in Javier CA $ 450,000
Cash 450000
(To record initial investment for 30% interest)

July 1 Cash $ 15,000

Investment in Javier 15000
(To record dividends received)

Dec 31 Investment in Javier CA $ 45,000

Income from Javier CA $ 45,000
(to recognize investment income from Javier CA)

30% of Javier CA's $ 100.000 net income $ 30,000

Excess allocated to inventories $ 30,000
Excess allocated to equipment $ 15,000
Investment Income from Javier CA $ 45,000

3. Investment in Javier CA balance at December 31 2014

Initial Cost $ 450,000
Dividends received $ 15,000
Income from Javier CA $ 45,000
Ending balance $ 480,000
 P2-7

Dil Corporation
Partial Income Statement
For the year ended December 31 2013

Investment Income
Income from Lar (Equity basis) $ 45,000
Income before extraordinary item $ 45,000

Extraordinary gain
Share of Lar's Operating loss carryforward $ 30,000
Net Income $ 75,000