Maurice Tutor
$15/per page/Negotiable
Computations (constructive retirement of subsidiary bonds)
Selected amounts from the separate unconsolidated financial statements of Poe Corporation and its 90 percent-owned subsidiary, Saw Company, at December 31, 2011, are as follows.
| Â |
Poe |
Saw |
|
Selected Income Statement Amounts |
 |  |
|
Sales |
$710,000 |
$530,000 |
|
Cost of goods sold |
490,000 |
370,000 |
|
Gain on sale of equipment |
— |
21,000 |
|
Earnings from investment in subsidiary |
63,000 |
— |
|
Interest expense |
— |
16,000 |
|
Depreciation |
25,000 |
20,000 |
|
Selected Balance Sheet Amounts |
 |  |
|
Cash |
$ 50,000 |
$ 15,000 |
|
Inventories |
229,000 |
150,000 |
|
Equipment |
440,000 |
360,000 |
|
Accumulated depreciation |
(200,000) |
(120,000) |
|
Investment in Saw |
189,000 |
— |
|
Investment in bonds |
91,000 |
— |
|
Bonds payable |
— |
(200,000) |
|
Common stock |
(100,000) |
(10,000) |
|
Additional paid-in capital |
(250,000) |
(40,000) |
|
Retained earnings |
(402,000) |
(140,000) |
|
Selected Statement of Retained |
 |  |
|
Earnings Amounts |
 |  |
|
Beginning balance December 31, 2010 |
$272,000 |
$100,000 |
|
Net income |
212,000 |
70,000 |
|
Dividends paid |
80,000 |
30,000 |
ADDITIONAL INFORMATION
1. On January 2, 2011, Poe purchased 90 percent of Saw’s 100,000 outstanding common stock for cash of $153,000. On that date, Saw’s stockholders’ equity equaled $150,000 and the fair values of Saw’s assets and liabilities equaled their carrying amounts. Poe accounted for the combination as an acquisition. The difference between fair value and book value was due to goodwill.
2. On September 4, 2011, Saw paid cash dividends of $30,000.
3. On December 31, 2011, Poe recorded its equity in Saw’s earnings.
4. On January 3, 2011, Saw sold equipment with an original cost of $30,000 and a carrying value of $15,000 to Poe for $36,000. The equipment had a remaining life of three years and was depreciated using the straight-line method by both companies.
5. During 2011, Saw sold merchandise to Poe for $60,000, which included a profit of $20,000. At December 31, 2011, half of this merchandise remained in Poe’s inventory.
6. On December 31, 2011, Poe paid $91,000 to purchase half of the outstanding bonds issued by Saw. The bonds mature on December 31, 2017, and were originally issued at par. These bonds pay interest annually on December 31 of each year, and the interest was paid to the prior investor immediately before Poe’s purchase of the bonds.
REQUIRED: Determine the amounts at which the following items will appear in the consolidated financial statements of Poe Corporation and Subsidiary for the year ended December 31, 2011.
1. Cash
2. Equipment less accumulated depreciation
3. Investment in Saw
4. Bonds payable (net of unamortized discount)
5. Common stock
6. Beginning retained earnings
7. Dividends paid
8. Gain on retirement of bonds
9. Cost of goods sold
10. Interest expense
11. Depreciation expense