Comprehensive Problem: Consolidation in Subsequent Period Thompson Company spent $240,000 to acquire all of Lake Corporation’s stock on January 1, 20X2. On December 31, 20X4, the trial balances of the two companies were as follows: Thompson Company Lake Corporation Item Debit Credit Debit Credit Cash $ 74,000 $ 42,000 Accounts Receivable 130,000 53,000 Land 60,000 50,000 Buildings & Equipment 500,000 350,000 Investment in Lake Corporation stock 268,000 130,000 Cost of Services Provided 470,000 18,000 Depreciation Expense 35,000 60,000 Other Expenses 57,000 12,000 Dividends Declared 30,000 Accumulated Depreciation $ 265,000 $ 93,000 Accounts Payable 71,000 17,000 Taxes Payable 58,000 60,000 Notes Payable 100,000 85,000 Common Stock 200,000 100,000 Retained Earnings 292,000 120,000 Service Revenue 610,000 240,000 Income from Subsidiary 28,000 $1,624,000 $1,624,000 $715,000 $715,000 Lake Corporation reported retained earnings of $100,000 at the date of acquisition. The difference between the acquisition price and underlying book value is assigned to buildings and equipment with a remaining economic life of 10 years from the date of acquisition. At December 31, 20X4, Lake owed Thompson $2,500 for services provided. Required a. Give all journal entries recorded by Thompson with regard to its investment in Lake during 20X4. b. Give all elimination entries required on December 31, 20X4, to prepare consolidated financial statements. c. Prepare a three-part consolidation worksheet as of December 31, 20X4.

Comprehensive Problem: Consolidation in Subsequent Period Thompson Company spent $240,000 to acquire all of Lake Corporation’s stock on January 1, 20X2. On December 31, 20X4, the trial balances of the...

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Comprehensive Problem: Consolidation in Subsequent Period

Thompson Company spent $240,000 to acquire all of Lake Corporation’s stock on January 1, 20X2. On December 31, 20X4, the trial balances of the two companies were as follows:

	Thompson Company	Lake Corporation
Item	Debit	Credit	Debit	Credit
Cash	$ 74,000		$ 42,000
Accounts Receivable	130,000		53,000
Land	60,000		50,000
Buildings & Equipment	500,000		350,000
Investment in Lake Corporation stock	268,000		130,000
Cost of Services Provided	470,000		18,000
Depreciation Expense	35,000		60,000
Other Expenses	57,000		12,000
Dividends Declared	30,000
Accumulated Depreciation		$ 265,000		$ 93,000
Accounts Payable		71,000		17,000
Taxes Payable		58,000		60,000
Notes Payable		100,000		85,000
Common Stock		200,000		100,000
Retained Earnings		292,000		120,000
Service Revenue		610,000		240,000
Income from Subsidiary		28,000
	$1,624,000	$1,624,000	$715,000	$715,000

Lake Corporation reported retained earnings of $100,000 at the date of acquisition. The difference between the acquisition price and underlying book value is assigned to buildings and equipment with a remaining economic life of 10 years from the date of acquisition. At December 31, 20X4, Lake owed Thompson $2,500 for services provided.

Required

a. Give all journal entries recorded by Thompson with regard to its investment in Lake during 20X4.

b. Give all elimination entries required on December 31, 20X4, to prepare consolidated financial statements.

c. Prepare a three-part consolidation worksheet as of December 31, 20X4.

Answered Same Day Dec 25, 2021

Solution

David answered on Dec 25 2021

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Comprehensive Problem: Consolidation in Subsequent Period Thompson Company spent $240,000 to acquire all of Lake Corporation’s stock on January 1, 20X2. On December 31, 20X4, the trial balances of the...

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