7/11
On January 1, 2017, Travers Company acquired 90 percent of Yarrow Company's outstanding stock for $891,000. The 10 percent noncontrolling interest had an assessed fair value of $99,000 on that date. Any acquisition date excess fair value over book value wa attributed to an unrecorded customer list developed by Yarrow with a remaining life of 15 years. On the same date, Yarrow acquired an 80 percent interest in Stookey Company for $496,000. At the acquisition date, the 20 percent noncontrolling interest fair value was $124.000. Any excess fair value was attributed to a fully amortized copyright that had a remaining life of 10 years. Although both investments are accounted for using the initial value method, neither Yarrow nor Stookey have distributed dividends since the acquisition date. Travers has a policy to declare and pay cash dividends each year equal to 40 percent of its separate company operating earnings. Reported income totals for 2017 follow. Travers Company Yarrow Company Stookey Company $ 490,000 255,000 196,000 Following are the 2018 financial statements for these three companies, Stookey has transferred numerous amounts of inventory to Yarrow since the takeover amounting to $118,000 (2017) and $147,500 (2018). These transactions include the same markup applicable to Stookey's outside sales. In each year, Yarrow carried 20 percent of this inventory into the succeeding year before disposing of it. An effective tax rate of 40 percent is applicable to all companies. All dividend declarations are paid in the same period. Sales Cost of goods sold Operating expenses Net income Retained earnings, 1/1/18 Net income (above) Dividends declared Retained earnings, 12/31/18 Current assets Investment in Yarrow Company Investment in Stookey Company Land, buildings, and equipment (net) Total assets Travers Company $(1,090,000) 580,700 120,900 $ (388,400) $ (890,000) (388,400) 155, 360 $(1,123, 040) $ 559,900 891,000 @ 1,175, 100 $ 2,626,000 Yarrow Company $ (746,300) 397,900 99,800 $ (249, 480) $ (748,200) (249,400) Stookey Company $ (538,000) 322,800 107,600 $ (107,600) $ (471,000) (107,600) $ (578,600) $ 382,700 $ (997,600) $ 473, 180 @ 496,000 874,000 $ 1,843, 100 @ 508,600 $ 891,300 RELLI E LO Total liabilities and equities $(2,626,000) $(1,843, 100) DIVU $ (891,300) Note: Parentheses indicate a credit balance. 1. Prepare the business combination's 2018 consolidation worksheet; ignore income tax effects. Determine the amount of income tax for Travers and Yarrow on a consolidated tax return for 2018. .. Determine the amount of Stookey's income tax on a separate tax return for 2018. 1. Based on the answers to requirements (b) and (c), what journal entry does this combination make to record 2018 income tax? Answer is not complete. Complete this question by entering your answers in the tabs below. Reg A Reg Band ReqD Prepare the business combination's 2018 consolidation worksheet; ignore income tax effects. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Amounts in the Debit and Credit columns should be entered as positive. Negative amounts for the Noncontrolling Intere: and Consolidated Totals columns should fe entered with a minus sign. Round your answers to nearest whole dollar amount) Show less TRAVERS COMPANY AND CONSOLIDATED SUBSIDIARIES Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entries Travers Yarrow Stookey Debit Company Company Company Noncontrolling Consolidated Accounts Credit Interest Balance Me Consolidation Entries Noncom Accounts Debit Credit Interest Balance Travers Company (1,090,000) 580,700 120,900 (388,400) Yarrow Company (746,300) 397,900 99,000 (249,400) Stookey Company (538,000) 322,800 107,600 (107,600) 147,500 11,800 26,100 156,940 (2,226,800) 1,156,260 353,600 (31,039) (18,148) (716,940) 31,039 X 18,148 (667,753) (890,000) Sales and other revenue Cost of goods sold Operating expenses Separate company net income Consolidated net income Net Income attributable to NCI (Yarrow) Net Income attributable to NCI (Stookey) Net Income attributable to Travers Company Retained earnings, 1/1/18: Travers Company Yarrow Company Stookey Company Net Income (above) Dividends declared Retained eamings, 12/31/18 Current assets Investment in Yarrow Company Investment in Stookey Company Land, buildings, & equipment (net) Copyright Customer list Total assets Liabilities (1,232,943) 342,043 137,648 (748,200) 885,848 471,000 (47 00) (107.600) (249,400) (388,400) 155,360 (1,123,040) 559.900 891,000 w (997.600) 473,100 (578,600) 382,700 156,360 (1,077,583) 1.403,900 11,800 342,943 1,233,943 137,648 633,648 1,175,100 496,000 874,000 508,600 130,500 162.400 14,500 11.600 2,626,000 (1.002.960) 1.843.100 (522,700) 2,557,700 116,000 150.800 4.228.400 (1,638,360) 891 300 (112,700)
