Using Microsoft Excel, prepare CONSOLIDATION WORKSHEET (spreadsheet) for Salmon
ID: 2455560 • Letter: U
Question
Using Microsoft Excel, prepare CONSOLIDATION WORKSHEET (spreadsheet) for Salmon and Perch. See project details below. On December 31, 20X8, Defoe Corporation acquired 80 percent of Crusoe Company's common stock for $104,000 cash. The fair value of the non-controlling interest at that date was determined to be $26,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition:
Defoe Corporation
Crusoe Company
Cash
$90,000
$20,000
Accounts Receivable
80,000
35,000
Inventory
100,000
40,000
Land
40,000
60,000
Buildings and Equipment
300,000
100,000
Less: Accumulated Depreciation
-100,000
-40,000
Investment in Crusoe
104,000
Total Assets
$614,000
$215,000
Accounts Payable
$120,000
$30,000
Mortgage Payable
200,000
100,000
Common Stock
50,000
25,000
Retained Earnings
244,000
60,000
Total Liabilities and Stockholder's Equity
$614,000
$215,000
On that date, the book values of Crusoe's assets and liabilities approximated fair value except for inventory, which had a fair value of $45,000, and buildings and equipment, which had a fair value of $100,000. At December 31, 20X8, Defoe reported accounts payable of $15,000 to Crusoe, which reported an equal amount in its accounts receivable.
Requirements: Provide the consolidating entries needed to prepare a consolidated balance sheet immediately following the business combination. Prepare a consolidated balance sheet worksheet.
Defoe Corporation
Crusoe Company
Cash
$90,000
$20,000
Accounts Receivable
80,000
35,000
Inventory
100,000
40,000
Land
40,000
60,000
Buildings and Equipment
300,000
100,000
Less: Accumulated Depreciation
-100,000
-40,000
Investment in Crusoe
104,000
Total Assets
$614,000
$215,000
Accounts Payable
$120,000
$30,000
Mortgage Payable
200,000
100,000
Common Stock
50,000
25,000
Retained Earnings
244,000
60,000
Total Liabilities and Stockholder's Equity
$614,000
$215,000
Explanation / Answer
3 Steps in Consolidation Procedures
Step 1: Combine
After you make sure that all subsidiary’s assets and liabilities are stated at fair values and all the other conditions are met, you can combine, or add up like items.
Step 2: Eliminate
After combining like items, we need to offset (eliminate):
and of course, recognize any non-controlling interest and goodwill.
Eliminate Intragroup Transactions
Parents and subsidiaries trade with each other very often.
However, when you look at both parent and subsidiary as at 1 company, which is the purpose of consolidation, then you find out that there’s no transaction at all.
In other words, group has not performed any transaction from the view of some external user.
Therefore you need to eliminate all transactions happening within the group, between a parent and its subsidiaries.
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