8 0 equity financing leases with unguaranteed residual value

8 0%, equity, financing leases with unguaranteed residual value, fixed asset profit. Steven Truck Company has been an 80%-owned subsidiary of Paulz Heavy Equipment since January 1, 2013, when Paulz acquired 128,000 shares of Steven common stock for $832,000, an amount equal to the book value of Steven’s net assets at that date. Steven’s net income and dividends paid since acquisition are as follows:

Required for a complete answer are as follows:

1. INCOME DISTRIBUTION SCHEDULES

2. CONSOLIDATED WORKSHEET

3. ELIMINATIONS SHEET

THANK YOU!

Problem 5A-1 7) 80%, equity, financing leases with unguaranteed residual value, fixed asset profit. Steven Truck Company has been an 80%-owned subsidiary of common stock for $832,000, an amount equal to the book value of Steven\'s net assets at that date. Steven\'s net income and dividends paid since acquisition are as follows: Pulz Heavy Equipment since January 1, 2013, when Paulz acquired 128,000 shares of Steven Year 2013 2014 2015 Totals Net Income Dividends 70,000 75,600 81,650 $227,250 $25,000 25,000 30,000 $80,000 On January 1, 2015, Paulz leased a truck from Steven. The 3-year financing-type lease pro- vides for payments of $10,000 each January 1 (induding present value of unguaranteed residual value of $4,763). On January 1, 2015, the present value of the truck at Stevens 8% implicit rate, including the unguaranteed residual value of $6,000 at the end of the third year, was $32,596. Paulz has used the 8% implicit rate to record the lease. The truck is being depreciated over three years on a straight-line basis. On January 1, 2016, Steven signed a 4-year financing-type lease with Paulz for the rental of specialized production machinery with an 8-year life. There is a $7,000 purchase option at the end of the fourth year. The lease agreement requires lease payments of S30,000 each January 1 plus $1,500 for maintenance of the equipment. It also calls for contingent payments equal to 10% of Steven\'s cost savings through the use of this equipment, as reflected in any increase in net income (excluding gains or losses on sale of assets) above the previous growth rate of Steven\'s net income. The present value of the equipment on January 1, 2016, at Paulz\'s 10% implicit rate was $109,388. On October 1, 2016, Steven sold Paulz a warehouse having a 20-year remaining life, a book value of $135,000, and an estimated salvage value of $20,000. Paulz paid $195,000 for the building, which is being depreciated on a straight-line basis. The trial balances were prepared by the separate companies on December 31, 2016, as follows: Paulz Heavy Steven Truck Equipment Company Cash . Accounts Receivable (net) Inventory 123,307 120,000 140,000 0,000 6,000 444) 109,388 (18,556 (13,674) . 2,075,000 ,45,000 90,485 228,000 200,000 97,000 Unearned Interest Income Assets Under Capital Lease (9,673) 27,833 Property, Plant, and Equipment Accumulated Investment in Steven Truck Company. . . . . . . . . . . Accounts Payable... Interest Payable Obligations Under Capital Lease . . Common Stock ($5 par) Retained Earnings, January1,2016.. . 1,045,800 .. . . . . . . . . . . . (100,000) (85,000) 7,939) (79,388) ..1,800,000 (800,000) (864,834 387,250) 740) 9,260] .. . (60,000) Interest Income 7,939)

Solution

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Income Distribution Schedules are given below:

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Particulars	Trial balance	Eliminations	Consolidated Income Statement	Non Controlling Interest	Controlling Retained Earnings	Consolidated Balances
	Paulz Heavy Equipment	Steven Truck Company	Dr.	Cr.
Cash	90,485	1,23,307						213,792
Receivables	228,000	1,20,000						348,000
Inventories	200,000	1,40,000						340,000
Minimum Lease Payments Receivable	97,000	10,000		10,000 (CL2s)
				97,000 (CL2p)
Unguaranteed Residual Value		6,000		6,000 (CL2s)
Unearned Interest Income	-9,673	-444	(CL2s) 1,237	412 (CL1s)
			(CL2p) 9,673	381 (CL1s)
Assets Under Capital Lease	27,833	109,388		27,833 (CL2s)
				109,388 (CL3p)
Accumulated Depreciation- Assets
Under Capital Lease	-18,556	13,674	(CL3s) 18,556
			(CL3p) 13,674
Property, Plant, & Equipment	20,75,000	1,145,000	(CL2s) 32,596	60,000 (F1)				3,301,984
			(CL3p) 109,388
Accumulated Depreciation-Property, Plant, & Equipment	-713,000	-160,000	(F2) 750	17,730 (CL3s)				-903,654
				13,674 (CL3p)
Investment in Steven Truck Company	1,045,800		(Cy2) 28,000	124,000 (Cy1)
				949,800 (EL)
Accounts Payable	-100,000	-85,000						-185,000
Interest Payable	-740	-7,939	(CL2s) 740
			(CL2p) 7,939
Obligations Under Capital Lease	-9,260	-79,388	(CL2s) 9,260
			(CL2p) 79,388
Common Stock ($5 par)	-1,800,000	-800,000	(EL) 640,000			-160,000		-1,800,000
Retained Earnings, January 1, 2016	-864,834	-387,250	(CL1s) 305	330 (CL3s)			-864,859
			(EL) 309,800	83 (CL3s)		-77,457
			(CL1s) 76
Sales	-3,200,000	-1,400,000			-4,600,000
Gain on Sale of Assets		-60,000	(F1) 60,000
Interest Income	-7,939	-1,152	(CL1s)1,152
			(CL1p) 7,939
Rent Income	-2,182		(CL4p) 2,182
Cost of Goods Sold	1,882,000	770,000			2,652,000
Interest Expense	740	7,939		740 (CL1s)
				7,939 (CL1p)
Depreciation Expense	135,000	45,000		750 (F1)
				413 (CL3s)	178,837
Other Expenses	924,326	483,213		2,182 (CL4p)	1,405,357
Subsidiary Income	-124,000		(Cy1) 124,000
Dividends Declared	144,000	35,000		28 000 (Cy2)		7,000	144,000
Total	-	-	1,456,655	1,456,655		-230,457
Consolidated Net Income					-363,806
To NCI					19,150	-19,150
To Controlling Interest					344,656		-344,656
Total NCI						-249,607		-249,607
Retained Earnings -Controlling Interest as on 31st December							-1,065,515	-1,065,515
Total								-