The individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2021, follow. Gibson acquired a 60 percent interest in Keller on January 1, 2020, in exchange for various considerations totaling $570,000. At the acquisition date, the fair value of the noncontrolling interest was $380,000 and Keller’s book value was $850,000. Keller 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. Gibson uses the partial equity method to account for its investment in Keller.

Gibson sold Keller land with a book value of $60,000 on January 2, 2020, for $100,000. Keller still holds this land at the end of the current year. Keller regularly transfers inventory to Gibson. In 2020, it shipped inventory costing $100,000 to Gibson at a price of $150,000. During 2021, intra-entity shipments totaled $200,000, although the original cost to Keller was only $140,000. In each of these years, 20 percent of the merchandise was not resold to outside parties until the period following the transfer. Gibson owes Keller $40,000 at the end of 2021.

a. Prepare a worksheet to consolidate the separate 2021 financial statements for Gibson and Keller.

b. How would the consolidation entries in requirement (a) have differed if Gibson had sold a building on January 2, 2020, with a $60,000 book value (cost of $140,000) to Keller for $100,000 instead of land, as the problem reports? Assume that the building had a 10-year remaining life at the date of transfer.

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Gibson Keller Company Company Sales . Cost of goods sold Operating expenses Equity in earnings of Keller $ (800,000) 500,000 $ (500,000) 300,000 60,000 -0- 100,000 (84,000) $ (284,000) $ (140,000) $ (620,000) (140,000) 60,000 Net income Retained earnings. 1/1/21 Net income (above) Dividends declared $(1,116,000) (284,000) 115,000 Retained earnings, 12/31/21 $(1,285,000) $ (700,000) Cash $ 177,000 2$ 90,000 Accounts receivable 356,000 410,000 320,000 -0- 390,000 Inventory Investment in Keller 440,000 726,000 180,000 Land Buildings and equipment (net) 496,000 300,000 $ 2,375,000 $ 1,510,000 $ (400,000) (320,000) (90,000) (700,000) $(1,510,000) Total assets $ (480,000) (610,000) -0- Liabilities Common stock Additional paid-in capital Retained earnings, 12/31/21 (1,285,000) $12,375,000) Total liabilities and equities