Use the Following Information to Answer the Question(s) Below

question 38

Essay

Use the following information to answer the question(s) below.
On January 1, 2014, Penelope Company acquired a 90% interest in Leah Company for $180,000 cash. On January 1, 2014, Leah Company had the following assets and liabilities:
Push-down accounting is used for the acquisition.
-On January 1, 2014, Jeff Company acquired a 90% interest in Marian Company for $198,000 cash. On January 1, 2014, Marian Company had the following assets and liabilities:
Push-down accounting is used for the acquisition.
Required:
1. Assume both companies use the entity theory. Prepare the elimination entry(ies) on consolidating work papers on January 1, 2014.
2. Assume both companies use the parent company theory. Prepare the elimination entry(ies) on consolidating work papers on January 1, 2014.

Calculate the predetermined overhead rate based on estimated machine-hours.

Understand the relationship between direct materials cost, manufacturing overhead, and the cost of goods manufactured and sold.

Understand and calculate the direct materials cost on the Schedule of Cost of Goods Manufactured.

Determine and analyze manufacturing overhead, including underapplied and overapplied amounts.

---

Definitions:

Proxy Fight

A fight for control of a corporation when two or more interests compete for the proxies of shareholders in the election of directors.

Shareholders

Individuals or institutions that own share(s) in a corporation, thereby having a claim on its profits and assets.

Board Members

Board members are individuals elected to represent shareholders and oversee the management and major decisions of a corporation.

Leveraged Buyout

A financial transaction in which a company is bought using a significant amount of borrowed money to meet the cost of acquisition.