1/1/2009 Plymouth acquired 60% interest in Sander in exchange for various consid
ID: 2343071 • Letter: 1
Question
1/1/2009 Plymouth acquired 60% interest in Sander in exchange for various considerations totaling $570,000. At the acquisition date,
NCI's FV: $380,000
Sander's BV: $850,000
Sander had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $100,000. This intangible asset is being amortized over 20 years.
Plymouth sold Sander land with a book value of $60,000 on Jan. 2, 2009, for $100,000. Sander still holds this land at the end of the current year.
Sander regularly transfers inventory to Plymouth. In 2009, it shipped inventory costing $100,000 to Plymouth at a price of $150,000. During 2010, intercompany shipments totaled $200,000, although the original cost to Sander was only $140,000. In each of these years, 20% of the merchandise was not resold to outside parties until the period following the transfer.
Plymouth uses the partial equity method. Plymouth owes Sander $40,000 at the end of 2010.
A) Prepare the elimination entires needed to complete a consolidation workpaper for 2010. Use the acquisition method to account for the non-controlling interests in Sander. Include entries such as S, A, I, D, E, P, TI, G, ED, *G, TL, *GL, and any if necessary.
B) Complete the consolidation worksheet for 2010 in the following worksheet.
Pymouth and Sander
Consolidated Worksheet
Year Ending December 31, 2010
Consolidation Entries
Debit
Consolidation Entries
Credit
Consolidated
Totals
Accounts Plymouth SanderConsolidation Entries
Debit
Consolidation Entries
Credit
NoncontrollingConsolidated
Totals
Sales (800,000) (500,000) (TI) Cost of Goods Sold 500,000 300,000 (G) (*G) (TI) Operating expenses 100,000 60,000 (E) Income of Sander (84,000) -0- (I) Separate company net income (284,000) (140,000) Consolidated net income To noncontrolling interest To parent RE, 1/1/10--Plymouth (1,116,000) (*TL) (*C) RE, 1/1/10--Sander (620,000) (*G) (S) Net income (above) (284,000) (140,000) (279,800) Dividends 115,000 60,000 (D) 115,000 Retained Earnings, 12/31/10 (1,285,000) (700,000) (1,231,800) Cash 177,000 90,000 Accounts recevable 356,000 410,000 (P) Inventory 440,000 320,000 (G) Investment in Sander 726,000 (D) (*C) (S) (I) (A) Land 180,000 390,000 (*TL) Buildings and equipment (net) 496,000 300,000 Customer List (A) (E) 90,000 Total assets 2,375,000 1,510,000 3,157,000 Liabilities (480,000) (400,000) (P) Common Stock (610,000) (320,000) (S) Additional payed-in capital (90,000) (S) Retained earnings, 12/31/10 (1,285,000) (700,000) NCI in Sander, 1/1/10 (S) (A) NCI In Sander, 12/31/10 Total Liabilities and Equity (2,375,000) (1,510,000) (3,157,000)Explanation / Answer
Part A.
Consolidation entries:
Entry
*TL
Retained Earnings
40,000
Land
40,000
Unrealized land gain = 100,000 - 60,000
Entry
*G
Retained Earnings
10,000
Cost of Goods Sold
10,000
Unrealized Gross Profit from 2009 recognized in 2010: 150,000 X 20% = 30,000; 30,000 X 33.33%
Entry
*C
Retained Earnings 1/1/10
9,000
Investment in Keller
9,000
Adjustment to parent company's beginning retained earnigns
Entry
S
Common Stock
320,000
APIC
90,000
Retained Earnings, 1/1/10
610,000
Investment in Keller
612,000
Non-Controlling Interest
408,000
Eliminate the equity accounts of the subsidiary
Entry
A
Customer List
95,000
Investment in Keller
57,000
Non-Controlling Interest
38,000
To record the value of customer list at beginning of 2013
Entry
I
Income of Keller
84,000
Investment in Keller
84,000
To eliminate intra-entity income
Entry
D
Investment in Keller
36,000
Dividends Paid
36,000
To elminate dividend payment from Keller to Gibson
Entry
E
Amortization Expense
5,000
Customer List
5,000
To record 2013 amortization
Entry
P
Liabilities
40,000
Accounts Receivable
40,000
To eliminate the loan from Keller to Gibson
Entry
TI
Sales
200,000
Cost of Goods Sold
200,000
To elminate sales revenue from Keller to Gibson
Entry
G
Cost of Goods Sold
12,000
Inventory
12,000
To defer 2013 gorss profit
Consolidation entries:
Entry
*TL
Retained Earnings
40,000
Land
40,000
Unrealized land gain = 100,000 - 60,000
Entry
*G
Retained Earnings
10,000
Cost of Goods Sold
10,000
Unrealized Gross Profit from 2009 recognized in 2010: 150,000 X 20% = 30,000; 30,000 X 33.33%
Entry
*C
Retained Earnings 1/1/10
9,000
Investment in Keller
9,000
Adjustment to parent company's beginning retained earnigns
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