# Calculate the LIFO reserve that would be reported in the companys books on September 30 if using LIFO.

. Preparing consolidation work sheet adjustment and elimination entries, P company acquired all of the common stock of S company on January 1, year 6, for \$430. During Year 6, P company sold merchandise on account costing \$600 to S company for \$1,000. S Company sold all of this merchandise to its customers by the end of Year 6. On December 31, Year 6, S Company still owes P Company \$200 related to these intercompany merchandise transactions.

Instruction :

A] Prepare the work-sheet adjustment and elimination entries to consolidate P Company and S Company for year 6.

B] Assume for this part that P Company paid \$510, for all of the common stock of S Company on January 1. Year 6. The common shareholders equity of S Company was \$430 on this date (+ common stock of \$100 + retained earning of \$330). P Company attributes any excess of the acquisition cost over the book value of the net assets acquired to a patent, which it amortizes over 10 years.

1) Compute the balance in the account Investment in S Company on P Companys books on December
31, year 6, assuming P Company uses the equity method.

2) Prepare the work sheet adjustment and elimination entries to consolidate P Company and S
Company for Year 6

(Since the consolidated statement does not require any entries, please use the two companies financial data to consolidated their company financial information with the provided statement.)

2.Calculating COGS and Inventory under LIFO and FIFO

Donuld Company sells many products. Sol is one of its popular items. Below is an analysis of the inventory purchases and sales of Sol for the month of September. Donuld Company uses the periodic inventory system.

INSTRUCTIONS

a. Using the FIFO assumption, calculate the amount charged to cost of goods sold for September. (Show computations)

b. Using the LIFO assumption, calculate the amount assigned to the inventory on hand on September 30. (Show computations)

c. Calculate the LIFO reserve that would be reported in the companys books on September 30 if using LIFO.

3.Preparation of Statement of Cash Flow Components

JEM Companys comparative balance sheets for 2004 and 2005 appear below.

The following additional information is available: net income for the year 2005 (as reported on the income statement) was \$50,000; dividends of \$40,000 were declared and paid; and equipment that cost \$8,000 and had a book value of \$1,000 was sold during the year for \$2,500.

Based on the information provided, answer the following:

a. What was cash provided by operations?
b. What was cash provided by investing activity?
c. How much was cash provided by financing activity?
d. What is the total change in cash for 2005?

4.Depreciation method by using “Sum-of –Digits Method)

Company purchased an equipment for \$300,000. It has an estimated salvage of \$20,000 and useful life of 8 years.

Instructions: