Company A acquired 75% of Company B ownership on January 1, 2015 for $96,000. At
ID: 2487816 • Letter: C
Question
Company A acquired 75% of Company B ownership on January 1, 2015 for $96,000. At that date, the fair value of the non-controlling interest was $32,000. The book value of Company B’s net assets at acquisition was $100,000. The book values and fair values of Company B’s assets were equal except for Company B’s Building and Equipment, which was worth $20,000 more than the book value. Buildings and equipment are depreciated on a 10 year basis.
Using the equity method, prepare the necessary eliminating entries and a consolidating worksheet that Company A will make if Company B retains separate legal incorporation and maintain its own accounting systems.
Would somebody help with the following eliminating entries and a consolidating worksheet. Thank you in advance!
Following are the account balances of the Acquisition Company and Acquiree Compnay as of Dec. 31.
Company A
Book Value
12/31
Company B
Book Value
12/31
Cash
47,500
21,000
Receivable
70,000
9,000
Inventory
90,000
28,000
Investment in Acquiree
96,375
-
Land
30,000
15,000
Building & Equipment, Net
350,000
150,000
Cost of Goods Sole
125,000
110,000
Depreciation expense
25,000
10,000
Operation expense
42,000
27,000
Interest expense
12,000
4,000
Other expense
13,500
5,000
Dividends declared
30,000
16,000
Accumulated depreciation
145,000
40,000
Accounts payable
40,000
16,000
Wages payable
22,000
9,000
Notes payable
150,000
50,000
Common stock
200,000
60,000
Retained earnings
102,000
40,000
Sales
260,000
180,000
Income from subsidiary
12,375
-
Company A
Book Value
12/31
Company B
Book Value
12/31
Cash
47,500
21,000
Receivable
70,000
9,000
Inventory
90,000
28,000
Investment in Acquiree
96,375
-
Land
30,000
15,000
Building & Equipment, Net
350,000
150,000
Cost of Goods Sole
125,000
110,000
Depreciation expense
25,000
10,000
Operation expense
42,000
27,000
Interest expense
12,000
4,000
Other expense
13,500
5,000
Dividends declared
30,000
16,000
Accumulated depreciation
145,000
40,000
Accounts payable
40,000
16,000
Wages payable
22,000
9,000
Notes payable
150,000
50,000
Common stock
200,000
60,000
Retained earnings
102,000
40,000
Sales
260,000
180,000
Income from subsidiary
12,375
-
Explanation / Answer
Company A Company B Company B (75%) Combined Consolidated (1) (2) (3)= 1+2 Assets Cash 47500 21000 15750 63250 63250 Receivable 70000 9000 6750 76750 76750 Inventory 90000 28000 21000 111000 111000 Investment in Company B 96375 0 96375 land 30000 15000 11250 41250 41250 Building & Equipment 350000 150000 112500 462500 482500 Total Assets 683875 223000 167250 851125 774750 Liabilities Acc dep 145000 40000 30000 175000 177000 Accounts Payble 40000 16000 12000 52000 52000 Wages Payble 22000 9000 6750 28750 28750 Notes payble 150000 50000 37500 187500 187500 Common Stock 200000 60000 45000 245000 200000 Retained Earnings 102000 40000 30000 132000 102000 Increase in retained earnings 24875 8000 6000 30875 27500 Total Liabilities 683875 223000 167250 851125 774750 Income Statement Sales 260000 180000 135000 395000 395000 Income from Subsidiary 12375 12375 272375 180000 135000 407375 395000 Expense Cost of Goods Sold 125000 110000 82500 207500 207500 Dep. 25000 10000 7500 32500 32500 Operation Expense 42000 27000 20250 62250 62250 Interest 12000 4000 3000 15000 15000 Other Expense 13500 5000 3750 17250 17250 217500 156000 117000 334500 334500 Net Income 54875 24000 18000 72875 60500 Dividend Declared 30000 16000 12000 42000 33000 Increase in retained Earnings 24875 8000 6000 30875 27500 Working Notes :- 1) Eliminating the parent's Company Investment Account Common Stock (Company B) 45000 Retained Earnings 39000 Equity in earnings in Company B 12375 Investment in Stock of Company B 96375 2) Adjustment in Fair Value of Building & Equipment Increase in Value 20000 Life 10 years Dep for 1 year 2000
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