JUSTICE INDUSTRIES-50 POINTS Justice Industries acquired 70% of Donyel Bakery on

Question

JUSTICE INDUSTRIES-50 POINTS Justice Industries acquired 70% of Donyel Bakery on January 1, 2018 for S 122,500. The fair value of the noncontrolling interest was equal to 20% of the fair value of Doyers net assets at that date. The book value of Donyel market value of $25,000 higher than book value (5-year remaining life). Assume that depreciation on depreciable assets was $60,000 on the acquisition date. Justice uses the equity method in accounting for its ownership of Donyel during 2018. On December 31, 2018, the trial balances of the two companies are as follows: r's net assets approximated market value except for Building & Equipment that had a Justice Debit Debit Donyel Account Debit Credit Current Assets Building and Equipment Investment in Donyel Depreciation Expense Wages Expense Other expenses Dividends Declared Accumulated Depreciation $169,500 500,000 133,000 25,000 85,000 20,000 40,000 $105,000 300,000 15,000 65,000 10,000 10,000 $175,000 50,000 100,000 200,000 230,000 200,000 $75,000 40,000 Current Liabilities Notes Payable Common Stock Retained earnings 120,000 100,000 50,000 120,000 Sales 17.500 Income from Donyel $972,500 $972,500 $505,000 $505,000 REQUIRED: Present all consolidated entries required as of December 31, 2018 to prepare consolidated financial statements. 20 points Prepare a 3-part consolidation worksheet 20 points Present in GOOD FORM the consolidated balance sheet on December 31, 2018. 10 points 1. 2. 3.

Explanation / Answer

1) & 2)

Justice Donyel Elimination Adjustments Consolidated Account Debit ($) Credit ($) Debit ($) Credit ($) Debit ($) Credit ($) Debit ($) Credit ($) Current assets 169500 105000 274500 Building & Equipment 500000 300000 800000 Investment in Donyel 133000 133000a Depreciation Expense 25000 15000 40000 Wages Expense 85000 65000 150000 Other Expenses 20000 10000 30000 Dividends Declared 40000 10000 50000 Accumulated Depreciation 175000 75000 10500 239500 Current Liabilities 50000 40000 90000 Notes Payable 100000 120000 220000 Common Stock 200000 100000 70000 200000 Minority Interestb 45000 Retained Earnings 230000 50000 35000 230000 Sales 200000 120000 320000 Income from Donyel 17500 17500 972500 972500 505000 505000 133000 133000 1344500 1344500 a 133000= 70000 (share of Justice in Common Stock of Donyel)+ 35000 (share of Justice in Retained Earnings of Donyel)+ 10500 ( Share of Justice in Incremental accumulated Depriciation of 15000)+ 17500 (Income from Donyel) b Minority Interest of 45000 = 30000 (30% Share in Common Stock of Donyel)+ 15000 ( 30% Share in Retained Earnings of Donyel)

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