Peanut Company acquired 90 percent of Snoopy Company's outstanding common stock for $270,000 on January 1, 20X8, when the book value of Snoopy's net assets was equal to $300,000. Peanut uses the equity method to account for investments. Trial balance data for Peanut and Snoopy as of January 1, 20X8, follow: Peanut Company Snoopy Company
Assets
Cash $55,000 $20,000
Accounts Receivable 50,000 30,000
Inventory 100,000 60,000
Investment in Snoopy Company 270,000
Land 225,000 100,000
Buildings and Equipment 700,000 100,000
Accumulated Depreciation (400,000) (10,000)
Total Assets $1,000,000 $400,000
Liabilities and Stockholders' Equity
Accounts Payable $75,000 $25,000
Bonds Payable 200,000 75,000
Common Stock 500,000 200,000
Retained Earnings 225,000 100,000
Total Liabilities and Equity $1,000,000 $400,000
Required:
a. Prepare the journal entry on Peanut's books for the acquisition of Snoopy on January 1, 20X8.
b. Prepare a consolidation worksheet on the acquisition date, January 1, 20X8.
c. Prepare a consolidated balance sheet on the acquisition date, January 1, 20X8.

Date    Description                      Debit          Credit

Jan. 1   Investment in Snoopy 270,000

           Cash Account                                 270,000

To record the 90% investment in Snoopy.

Jan. 1  

Cash                                        20,000

Accounts receivable               30,000

Inventory                                 60,000

Land                                       100,000

Building, net                            90,000

Goodwill on acquisition        100,000

Investment in Snoopy Company             270,000

Accounts Payable                                       25,000

Bonds Payable                                            75,000

Noncontrolling interest                              30,000

b. Consolidation Worksheet on January 1, 20X8:

                                                    Peanut    Snoopy    DR   CR  Consolidated

                                                 Company   Company

Assets

Cash                                        $55,000   $20,000                    $75,000

Investment in Snoopy           270,000                         270,000CR

Land                                       225,000    100,000                     325,000  

Buildings and Equipment     700,000     100,000                     800,000

Accumulated Depreciation (400,000)     (10,000)                    (410,000)

Goodwill                                                                                       100,000

Total Assets                      $1,000,000 $400,000                 $1,130,000

Liabilities and Stockholders' Equity

Accounts Payable                 $75,000   $25,000                      100,000

Bonds Payable                      200,000     75,000                      275,000

Common Stock                     500,000  200,000 200,000 500,000

Retained Earnings               225,000    100,000 100,000 225,000

Noncontrolling interest                                                                30,000

Total Liabilities and Equity $1,000,000 $400,000               $1,130,000

c. Consolidated Balance Sheet

Assets

Cash                                            $75,000

Land                                           325,000  

Buildings and Equipment         800,000

Accumulated Depreciation      (410,000)

Goodwill                                     100,000

Total Assets                          $1,130,000

Liabilities and Stockholders' Equity

Accounts Payable                  $100,000

Bonds Payable                        275,000

Common Stock                     500,000

Retained Earnings               225,000

Noncontrolling interest            30,000

Total Liabilities and Equity $1,130,000

Explanation:

a) Trial balance data for Peanut and Snoopy as of January 1, 20X8, follow:

                                                        Peanut      Snoopy

                                                     Company   Company

Assets

Cash                                             $55,000      $20,000

Accounts Receivable                     50,000        30,000

Inventory                                       100,000        60,000

Investment in Snoopy Company 270,000

Land                                             225,000      100,000

Buildings and Equipment            700,000      100,000

Accumulated Depreciation        (400,000)      (10,000)

Total Assets                             $1,000,000  $400,000

Liabilities and Stockholders' Equity

Accounts Payable                        $75,000    $25,000

Bonds Payable                             200,000      75,000  

Common Stock                            500,000   200,000

Retained Earnings                       225,000    100,000

Total Liabilities and Equity      $1,000,000 $400,000

the answer to this question would be shared investment