Answer:
a.
Dr Investment in Wolfpack, Inc. 618,500
Cr Contingent performance obligation 51,800
Cr Cash 566,700
b.
12/31/17
Dr Loss from increase in contingent performance obligation 7,400
Cr Contingent performance obligation 7,400
12/31/17
Dr Loss from increase in contingent performance obligation 200
Cr Contingent performance obligation 200
12/31/18
Dr Contingent performance obligation 59,000
Cr Cash 59,000
c.
Equity Method
Dr Common stock- Wolfpack 200,000
Dr Retained earnings-Wolfpack 274,000
Cr Investment in Wolfpack 474,000
Dr Royalty agreements 122,400
Dr Goodwill 71,500
Cr Investment in Wolfpack 193,900
Dr Equity earnings of Wolfpack 74,400
Cr Investment in Wolfpack 74,400
Dr Investment in Wolfpack 25,000
Cr Dividends paid 25,000
Dr Amortization expense 13,600
Cr Royalty agreements 13,600
d.
Initial Value Method
Dr Investment in Wolfpack 59,400
Cr Retained earnings-Branson 59,400
Dr Common stock- Wolfpack 200,000
Dr Retained earnings-Wolfpack 284,000
Cr Investment in Wolfpack 484,000
Dr Royalty agreements 122,400
Dr Goodwill 71,500
Cr Investment in Wolfpack 193,900
Dr Dividend income 25,000
Cr Dividends paid 25,000
Dr Amortization expense 13,600
Cr Royalty agreements 13,600
Explanation:
a. Preparation of the Journal entry to record the acquisition of the shares of its Wolfpack subsidiary
Dr Investment in Wolfpack, Inc. 618,500
Cr Contingent performance obligation 51,800
Cr Cash 566,700
(566,700+51,800)
b. Preparation of the Journal entries at the end of 2017 and 2018 and the December 31, 2018, payment.
12/31/17
Dr Loss from increase in contingent performance obligation 7,400
(59,200 - 51,800)
Cr Contingent performance obligation 7,400
12/31/17
Dr Loss from increase in contingent performance obligation 200
(59,000 - 59,200)
Cr Contingent performance obligation 200
12/31/18
Dr Contingent performance obligation 59,000
Cr Cash 59,000
c. Preparation of consolidation worksheet journal entries as of December 31, 2018
Equity Method
Dr Common stock- Wolfpack 200,000
Dr Retained earnings-Wolfpack 274,000
(211,000+ (78,000 - 15,000)
Cr Investment in Wolfpack 474,000 (274,000+200,000)
Dr Royalty agreements 122,400
(136,000 - 13,600)
(136,000/10 years=13,600)
Dr Goodwill 71,500
( 618,500- 411,000 - 136,000)
Cr Investment in Wolfpack 193,900
(122,400+71,500)
Dr Equity earnings of Wolfpack 74,400
(88,000 - 13,600)
Cr Investment in Wolfpack 74,400
Dr Investment in Wolfpack 25,000
Cr Dividends paid 25,000
Dr Amortization expense 13,600
(136,000/10 years)
Cr Royalty agreements 13,600
d. Preparation of consolidation worksheet journal entries as of December 31, 2018,
Initial Value Method
Dr Investment in Wolfpack 59,400
(88,000-15,000-13,600)
Cr Retained earnings-Branson 59,400
Dr Common stock- Wolfpack 200,000
Dr Retained earnings-Wolfpack 284,000
(211,000+ (88,000 - 15,000)
Cr Investment in Wolfpack 484,000
(284,000+200,000)
Dr Royalty agreements 122,400
(136,000 - 13,600)
Dr Goodwill 71,500
( 618,500 - 411,000 - 136,000)
Cr Investment in Wolfpack 193,900
Dr Dividend income 25,000
Cr Dividends paid 25,000
Dr Amortization expense 13,600
Cr Royalty agreements 13,600
