The following balance sheets have been prepared on December 31, Year 13 for Albert Corp. and Becky Inc. Balance Sheets Albert & Becky Cash $30,000 & $50,000 Accounts Receivable $180,000 & $100,000
The following balance sheets have been prepared on December 31, Year 13 for Albert Corp. and Becky Inc.
Balance Sheets Albert & Becky
Cash $30,000 & $50,000
Accounts Receivable $180,000 & $100,000
Inventory $70,000 & $30,000
Investment in Becky $100,000
Property, Plant and Equipment* $600,000 & $140,000
Total Assets $700,000 & $280,000 * Includes land
Current Liabilities $120,000 & $30,000
Long-Term Debt $400,000 & $20,000
Common shares $90,000 & $40,000
Retained Earnings $90,000 & $190,000
Liabilities and Equity $700,000 & $280,000
Additional Information: Albert uses the cost method to account for its 50% interest in Becky, which it acquired on January 1, Year 10 for $100,000. On that date, Becky's retained earnings were $20,000 and common shares $40,000. The acquisition differential was fully amortized by the end of Year 13. Albert sold Land to Becky during Year 12 and recorded a $15,000 gain on the sale. At December 31, Year 13, Albert's inventory contained $50,000 of merchandise purchased from Becky of which $20,000 remained unpaid at year-end. Becky charges a 20% profit margin. Both companies are subject to a tax rate of 20%.
Required: a. Prepare a Consolidated
b. Prepare a Balance Sheet for Albert on December 31, Year 13 assuming that Albert's Investment in Becky is a joint venture investment. Show calculations for consolidated retained earnings for parts a. and b. For part b., show calculation for Investment in Becky.
Hints: Total Assets a. $840,000; b. $705,000
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