PROBLEM Scenario 3-4

question 18

Essay

PROBLEM
Scenario 3-4
On January 1, 20X1, Parent Company purchased 80% of the common stock of Subsidiary Company for $316,000. On this date, Subsidiary had common stock, other paid-in capital, and retained earnings of $40,000, $120,000, and $190,000, respectively. Net income and dividends for 2 years for Subsidiary Company were as follows:
On January 1, 20X1, the only tangible assets of Subsidiary that were undervalued were inventory and building. Inventory, for which FIFO is used, was worth $5,000 more than cost. The inventory was sold in 20X1. Building, which was worth $15,000 more than book value, has a remaining life of 8 years, and straight-line depreciation is used. Any remaining excess is goodwill.
-Refer to Scenario 3-4.
Prepare the necessary date alignment entries for the consolidating worksheet for December 31, 20X1 and December 31, 20X2 assuming that Parent records its investment in Subsidiary using
a. the cost method
b. the simple equity method
If date alignment entries are not required, give rationale.

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Definitions:

Flextime

An arrangement that allows employees to choose their working hours within agreed limits, promoting work-life balance.

Compressed Workweek

A work schedule that allows employees to work their full hours over fewer days, such as four ten-hour days, leading to longer weekends and potential cost savings.

Mutual Trust

A reciprocal belief between parties that each will act with honesty, integrity, and reliability.

Employment Policies

Guidelines and rules established by organizations to manage their workforce effectively.