Project #23756 - B4

Excel Spreadsheet

 

On January 1, 2012, Patrick Company purchased 100 percent of the outstanding voting stock of Shawn, Inc., for $1,000,000 in cash and other consideration. At the purchase date, Shawn had common stock of $500,000 and retained earnings of $185,000. Patrick attributed the excess of acquisition-date fair value over Shawn’s book value to a trade name with a 25-year life. Patrick uses the equity method to account for its investment in Shawn.

During the next two years, Shawn reported the following:

 

Income

Dividends

Inventory Transfers to Patrick at Transfer Price

2012

$78,000

$25,000

$190,000

2013

85,000

27,000

210,000

Shawn sells inventory to Patrick after a markup based on a gross profit rate. At the end of 2012 and 2013, 30 percent of the current year purchases remain in Patrick’s inventory.

Required

Create an Excel spreadsheet that computes the following:

  1. Equity method balance in Patrick’s Investment in Shawn, Inc., account as of December 31, 2013.
  2. Worksheet adjustments for the December 31, 2013, consolidation of Patrick and Shawn.

Formulate your solution so that Shawn’s gross profit rate on sales to Patrick is treated as a variable

Subject Business
Due By (Pacific Time) 02/28/2014 10:30 am
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