it is no a writing assignment it is consolidation in an excel file
Part 1 (60 pts) Part 1 (90pts) Selected amounts from the separate unconsolidated financial statements of Poe Corp. and its 90 percent-owned subsidiary, Shaw Co., (notice the use of P and S) at December 31, 2018. Poe Shaw _______________________________________________________________ Income statements amounts Sales $510,000 $340,000 Cost of goods sold 310,000 198,000 Equity income from subsidiary 45,000 - Interest expense - 16,000 Interest revenue 10,000 Depreciation 25,000 20,000 Other Expenses 22,000 56,000 Net income $208,000 50,000 Balance sheet amounts Cash $ 50,000 $ 15,000 A/R 27,000 20,000 Inventories 218,000 349,000 Equipment 411,000 350,000 Accumulated depreciation (200,000) (120,000) Investment in Shaw 225,000 - Investment in bonds 184,000 - Current Liabilities (65,000) (20,000) Notes Payable (14,000 Bonds payable - (400,000) Common stock (100,000) (10,000) Additional paid-in capital (250,000) (40,000) Retained earnings-12/31/18 (491,000) (130,000) Selected statement of retained earnings amounts Beginning balance January 1, 2018 $383,000 $100,000 Net Income 208,000 50,000 Dividends paid (100,000) (20,000) Ending Retained Earnings 12/31/18 $491,000 $130,000 Additional Information 1. On January 1, 2016 Poe purchased 90 percent of Shaw Co.’s outstanding common stock for cash of $50,000 and by issuing its own stock with a fair value of $130,000 ($40,000 par). On that date, the 10 % minority shares were trading for $20,000, and Shaw’s stockholders’ equity showed common stock of $10,000, APIC of $40,000 and retained earnings of $90,000. Shaw’s equipment, with 10 years of life remaining, was undervalued by $20,000. Also, one of Shaw’s Notes Payable was overvalued by $20,000 and had 4 years remaining. If there is any excess purchase price not attributable to tangible items it is attributed to goodwill. . 2. On January 3, 2017 Poe sold equipment with an original cost of $50,000 and accumulated depreciation of $20,000 to Shaw for $20,000. The equipment had a remaining life of five years and was depreciated using the straight-line method by both companies. 3. During 2018 Shaw sold merchandise to Poe for $200,000 which had a cost of $140,000. At December 31, 2018, $20,000 of this merchandise remained in Poe’s inventory. At 12/31/18, Poe still owed Shaw $14,000 for this purchase. During 2017, Shaw sold merchandise for $90,000 which had cost $60000. $15,000 (at sales price) of these transfers remained in Poe’s inventory at 12/31/17. During 2016, Shaw sold merchandise with a cost of $15,000 to Poe for $30,000. $7,000 of this was still in inventory at 12/31/16. 4. On January 1, 2018 Poe paid $182,000 to purchase half of the outstanding bonds issued by Shaw. The purchase was priced to earn Poe a 5% return. The bonds mature on December 31, 2025 and were originally issued at par. These bonds pay 4% interest annually on December 31, and the interest was paid to the prior investor immediately before Poe’s purchase of the bonds (i.e., no accrued interest on date of purchase). Poe amortizes any implied discount or premium over the remaining life of the bonds using the straight line method. Your Mission, should you decide to accept it: 1. Does Poe use the cost method, the equity method, or the partial equity method to account for its investment in Shaw’s stock? How did you know- show reconciliation computations? 2. Recreate the journal entry made by Poe on 1/1/16 to acquire Shaw’s stock. You don’t need to post this to the worksheet since it has been booked by Poe already. 3. Prepare the necessary consolidation elimination entries at 12/31/18 in general journal form and link to the worksheet. Boxes are provided as guidelines, but as Johnny Depp’s friend Captain Barbosa says, “They’re not really rules, more like guidelines.” 4. Prepare a consolidation worksheet at 12/31/18 using the provided EXCEL template file. 5. Present the consolidated income statement and balance sheet at 12/31/11 in good form. This should automatically be produced from the template file, but it may need some tinkering to add or delete accounts and/or links. 6. Right now, everything is in balance. Good luck. Part 2 (10 pts)- answer independently of Part 1 On January 1, 2016 Poe purchased 90 percent of Shaw Co.’s outstanding common stock for cash of $50,000 and by issuing its own stock with a fair value of $100,000 ($40,000 par). On that date, the 10 % minority shares were trading for $20,000, and Shaw’s stockholders’ equity showed common stock of $10,000, APIC of $40,000 and retained earnings of $130,000. Shaw’s equipment, with 10 years of life remaining, was undervalued by $80,000. Also, one of Shaw’s Notes Payable was undervalued by $40,000 and had 4 years remaining. Recalculate the allocation of any excess purchase price among Shaw’s mis-valued assets at that date and prepare the normal 2nd and 3rd consolidation elimination entries (write up and write down) years later at 12/31/18 assuming Poe used the full equity method. Show your work.