Acme Powder Corporation purchased 70 percent of the stock of Brown Company on December 31, 20X7, at
Question:
Acme Powder Corporation purchased 70 percent of the stock of Brown Company on December 31, 20X7, at underlying book value. The balance sheets of the two companies on December 31, 20X9, are as follows:
On December 31, 20X9, Acme Powder Corporation holds inventory purchased from Brown Company for \(\$ 70,000\). Brown's cost of producing the merchandise was \(\$ 50,000\). Brown Company had purchased inventory from Acme Powder also. Brown's ending inventory contains \(\$ 85,000\) of purchases that had cost Acme Powder \(\$ 60,000\) to produce.
On December 30, 20X9, Brown Company sold equipment to Acme Powder for \(\$ 90,000\). The equipment was purchased by Brown Company for \(\$ 120,000\) several years earlier and had a book value of \(\$ 40,000\) at the time of sale to Acme. The two companies file separate tax returns and are subject to a 40 percent tax rate. Acme Powder does not record tax expense on its share of the undistributed earnings of Brown Company.
\section*{Required}
a. Complete a consolidated balance sheet workpaper as of December 31, 20X9.
b. Prepare a consolidated balance sheet as of December 31, 20X9.
Step by Step Answer:
Advanced Financial Accounting
ISBN: 9780072444124
5th Edition
Authors: Richard E. Baker, Valdean C. Lembke, Thomas E. King