35. The individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2018, follow. Gibson acquired a 60 percent interest in Keller on January 1, 2017, 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 S100,000. This intangible asset is being amortized over 20 years, Gibson sold Keller land with a book value of $60,000 on January 2, 2017. for $100,000. Keller still holds this land at the end of the current year Keller regularly transfers inventory to Gibson. In 2017, it shipped inventory costing $100,000 to Git Read this section. If you do not understand the highli 2018, intra-entity shipments totaled $200,000, although the original cost to Keller was only $140,00 topic. of the merchandise was not resold to outside parties until the period following the transfer Gibson owes Koller $40,000 at the end of 2018 Sales Cost of goods sold Operating expenses Equity in earnings of Keller Net income Retained earnings, 1/1/18 Net income (above) Dividends declared Retained earnings, 12/31/18 Cash Accounts receivable Inventory Investment in Keller Land Buildings and equipment (net) Total assets Liabilities Common stock Additional paid-in capital Retained earnings, 12/31/18 Total liabilities and equities Gibson Company Keller Company $ (800,000) $ (500,000) 500,000 300,000 100,000 60,000 (84,000) -0- $ (284,000) $ (140,000) $(1,116,000) $ (620,000) (284,000) (140,000) 115,000 60,000 $(1.285,000) $ (700,000) $ 177,000 $ 90,000 356,000 410,000 440,000 320,000 726,000 -0- 180,000 390,000 496,000 300,000 $ 2,375,000 $ 1,510,000 $ (480,000) $ (400,000) (610,000) (320,000) -0- (90,000) (1,285,000) (700,000) $(2,375.000) $(1,510,000) lab a. Prepare a worksheet to consolidate the separate 2018 financial statements for Gibson and Keller. b. How would the consolidation entries in requirement (a) have differed if Gibson had sold a building 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. Problem 05-35 Part A Remaining Life in years Annual Excess Amort Consideration transferred Noncontrolling interest fair value Subsidiary fair value at acquisition-date Book value Fair value in excess of book value Excess falr value assignment to customer list Consolidation entries: Entry + Entry Entry Entry 5 6 17 38 89 10 11 42 43 44 45 46 47 48 B C D E F G H J Entry Entry Entry + 0 Entry Entry Entry 3 *4 75 76 27 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 Entry Excess fair value amortization 2017 Intra-entity gross profit recognized in 2018 2018 intra-entity gross profit deferred Keller realized Income 2018 Outside ownership percentage Net Income attributable to n noncontrolling interest 1 2 3 14 05 06 07 08 09 10 111 112 GIBSON AND KELLER Consolidation Worksheet Year Ending December 31, 2018 Non- B D E F G H J Year Ending December 31, 2018 Consolidation Entries Deb Accounts Sales Cost of goods sold Non- controlling Interest Credit Gibson (800,000) 500,000 Keller (500.000) 300,000 Consolidated Totals 60,000 Operating expenses Equity in earnings of Keller Seper the company red Income Consolidated net income To no controlling interest To Gibson 100,000 (84000) 284.000 (140,000 Retained earnings 1/1 Abson (1116.000) - Keller (20.000) Net Income Dividends Renderings 12/31 (284,000) 115,000 (1.285.000) (140,000) 12 Coko Cath Accounts receivable Inventory Investment in Keller 177,000 35,000 440,000 726,000 90,000 410.000 320.000 300.000 180,000 496,000 300,000 2 3 1 5 6 7 8 9 0 -1 2 13 14 5 6 #7 48 19 50 51 52 53 Land Buildings and equipment (net) Customer list Total 2.375,000 1,510,000 (480,000) (610.000) cine Common stock Addol pald-in capital Retnined caring, 12/31 Noncartraling interestin NC in Keller, 11 (400.000) (320,000) 90.000) (700.000 (1,285,000) NCI Kate, 12/31 54 Tools and 12.325.000) (1.510.000 55 E10 A B D E F G H J K 156 157 Part b. How would the consolidation entries in requirement (a) have differed if Gibson had sold a building with a $600,000 book value (cost of $140,000) to Keller for $100,000 Instead of land, as the problem reports? 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 Entry Entry 174 * 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 198 199 200 201 202 203