In this course, you will have two case studies to complete. Both will involve completing a consolidation worksheet for two companies whose statements need to be consolidated. The first case will be due in Week 4. The second case will involve Intra-Entity Asset Transactions and will be due at the end of Week 6.
Case Study 1 – Due Week 4
On January 1, 2020, Innovus, Inc., acquired 100 percent of the common stock of ChipTech Company for $670,000 in cash and other fair-value consideration. ChipTech’s fair value was allocated among its net assets as follows:
The December 31, 2021, trial balances for the parent and subsidiary follow (there were no intra-entity payables on that date):
Using Excel, compute consolidated balances for Innovus and ChipTech by completing the provided worksheet. The Excel Template can be accessed by .
Case Study 2 – Due Week 6
On January 1, 2020, James Company purchased 100 percent of the outstanding voting stock of Nolan, Inc., for $1,000,000 in cash and other consideration. At the purchase date, Nolan had common stock of $500,000 and retained earnings of $185,000. James attributed the excess of acquisition-date fair value over Nolan’s book value to a trade name with an estimated 25-year remaining useful life. James uses the equity method to account for its investment in Nolan.
During the next two years, Nolan reported the following:
Nolan sells inventory to James after a markup based on a gross profit rate. At the end of 2020 and 2021, 30 percent of the current year purchases remain in James’s inventory.
Using the attached Excel template, compute the following:
- The Equity Method balance in James’ Investment in Nolan, Inc., account as of December 31, 2021
- Worksheet adjustments for the December 31, 2021 adjustments of James and Nolan. Use the following Codes to designate the purpose of the journal entry:
Formulate your solution so that Nolan’s gross profit rate on sales to James is treated as a variable.
case 1 https://lms.devry.edu/lms/content/1620/61851/ACCT405/ACCT405-Case1-Template.xlsx
case 2 https://lms.devry.edu/lms/content/1620/61858/ACCT405/ACCT405-Case2a-Template.xlsx