ACC 405 Final Project One Scenario Posey Company Overview You are a financial accountant for Posey Company tasked with preparing consolidation documentation at year end. You have the following information: December 31, 20X5 Posey Company acquired 90% of Stargell Corporation's outstanding common stock for $1,116,900. On that date: The fair value of the noncontrolling interest was $124,100, Stargell reported common stock outstanding of $487,000, premium on common stock of $267,000, and retained earnings of $407,000, the book values and fair values of Stargell's assets and liabilities were equal except for land, which was worth $30,000 more than its book value. On April 1, 20X6 Posey issued at par $200,000 of 10% bonds directly to Stargell, interest on the bonds is payable March 31 and September 30, On January 2, 20X7 Posey purchased all of Stargell's outstanding 10-year, 12% bonds from an unrelated institutional investor at 98. The bonds originally had been issued on January 2, 20x1, for 101. Interest on the bonds is payable December 31 and June 30. Since the clate it was acquired by Posey Stargell has sold inventory to Posey on a regular basis. The amount of such intercompany sales totaled $67,000 in 20X6 and $83,000 in 20X7, including a 30% gross profit All inventory transferred in 20/6 had been resold by December 31, 20X6, except inventory for which Posey had paid $18,000 and did not resell until January 20X7. Al inventory transferred in 2017 had been resold at December 31, 20X7, except merchandise for which Posey had paid $16,667 As of December 31, 20X7 Stargell had declared but not yet paid its fourth quarter dividend of $12.750 . Both Posey and Stargell use straight-line depreciation and amortization, including the amortization of bond discount and premium - On December 31, 20X7. Posey's management reviewed the amount attributed to goodwill as a result of its purchase of Stargell common stock and concluded that an impairment loss in the amount of $25,000 had occurred during 20X7 and should be shared proportionately between the controlling and noncontrolling interests. Pasey uses the fully adjusted equity method to account for its investment in Stargell On December 31, 20X7, trial balances for Posey and Stargell appeared as follows: Company $ Posey Company Debit Credit 49,500 121,500 317,000 1,243,800 985,000 Stargell Corporation Debit Credit 39,000 90,100 364,900 Item Cash Current Receivables Inventory Investment in Stargel Stock Investment in Stargell Bonds Investment in Posey Bonds Land Buildings and Equipment Cost of Goods Sold Depreciation & Amortization Other Expenses Dividends Declared Accumulated Depreciation Current Payables Bonds Payable Premium on Bonds Payable Common Stock Premium on Common Stock Retained Emines, lanuary 1 Sales Other Income Income froit Stargell Corp. Total 1,241,000 2,940,000 1,829,000 184,000 632,000 61,000 200,000 518.000 1,915,000 426,000 65,000 206,000 51,000 $ 1,050,000 699,190 200,000 910,000 610,000 2,848,950 3,010,000 143,000 132.660 9,603,800 597,000 213,000 1,000,000 3,000 487.000 267,000 457,000 801.000 50,000 S 9.603,800 S $ 3,875,000 $ 3,875,000 Stargell's 20X7 net income * 20x6 profit realized in 20x7 constructive gain on retirement of bonds unrealized profit on 20x7 transfer 154,000 5,400 24,000 (5,000) (6,000) proportion of constructive gain on bond retirement recognized currently by separate affiliates ($24000/ 4 years) 8 impairment of goodwill -9 subsidiary income to be aportioned o noncontrolling interest proportionate share 51 Income to noncontrolling interest (25,000) 147,400 10% 14,740 + 63 Net income calculations 72 Net income Milestone One instructions Record the basic consolidation entry. Accounts Record the amortized excess value differential entry. Record the excess value (differential) reclassification entry. 13 Record the reversal of last year's deferral. 16 Record the deferral of the 20x7 unrealized profits on the inventory transfer. 20 Record the elimination of the intercompany holdings of Posey's bonds. 23 Record the entry to eliminate the intercompany interest receivables/payables. 26 Record the entry to eliminate the accrued interest on the intercompany bonds. E 29 Record the entry to eliminate the intercompany holdings of Stargell's bonds. II 32 Record the entry to eliminate the intercompany dividend payable/receivable. ACC 405 Final Project One Scenario Posey Company Overview You are a financial accountant for Posey Company tasked with preparing consolidation documentation at year end. You have the following information: December 31, 20X5 Posey Company acquired 90% of Stargell Corporation's outstanding common stock for $1,116,900. On that date: The fair value of the noncontrolling interest was $124,100, Stargell reported common stock outstanding of $487,000, premium on common stock of $267,000, and retained earnings of $407,000, the book values and fair values of Stargell's assets and liabilities were equal except for land, which was worth $30,000 more than its book value. On April 1, 20X6 Posey issued at par $200,000 of 10% bonds directly to Stargell, interest on the bonds is payable March 31 and September 30, On January 2, 20X7 Posey purchased all of Stargell's outstanding 10-year, 12% bonds from an unrelated institutional investor at 98. The bonds originally had been issued on January 2, 20x1, for 101. Interest on the bonds is payable December 31 and June 30. Since the clate it was acquired by Posey Stargell has sold inventory to Posey on a regular basis. The amount of such intercompany sales totaled $67,000 in 20X6 and $83,000 in 20X7, including a 30% gross profit All inventory transferred in 20/6 had been resold by December 31, 20X6, except inventory for which Posey had paid $18,000 and did not resell until January 20X7. Al inventory transferred in 2017 had been resold at December 31, 20X7, except merchandise for which Posey had paid $16,667 As of December 31, 20X7 Stargell had declared but not yet paid its fourth quarter dividend of $12.750 . Both Posey and Stargell use straight-line depreciation and amortization, including the amortization of bond discount and premium - On December 31, 20X7. Posey's management reviewed the amount attributed to goodwill as a result of its purchase of Stargell common stock and concluded that an impairment loss in the amount of $25,000 had occurred during 20X7 and should be shared proportionately between the controlling and noncontrolling interests. Pasey uses the fully adjusted equity method to account for its investment in Stargell On December 31, 20X7, trial balances for Posey and Stargell appeared as follows: Company $ Posey Company Debit Credit 49,500 121,500 317,000 1,243,800 985,000 Stargell Corporation Debit Credit 39,000 90,100 364,900 Item Cash Current Receivables Inventory Investment in Stargel Stock Investment in Stargell Bonds Investment in Posey Bonds Land Buildings and Equipment Cost of Goods Sold Depreciation & Amortization Other Expenses Dividends Declared Accumulated Depreciation Current Payables Bonds Payable Premium on Bonds Payable Common Stock Premium on Common Stock Retained Emines, lanuary 1 Sales Other Income Income froit Stargell Corp. Total 1,241,000 2,940,000 1,829,000 184,000 632,000 61,000 200,000 518.000 1,915,000 426,000 65,000 206,000 51,000 $ 1,050,000 699,190 200,000 910,000 610,000 2,848,950 3,010,000 143,000 132.660 9,603,800 597,000 213,000 1,000,000 3,000 487.000 267,000 457,000 801.000 50,000 S 9.603,800 S $ 3,875,000 $ 3,875,000 Stargell's 20X7 net income * 20x6 profit realized in 20x7 constructive gain on retirement of bonds unrealized profit on 20x7 transfer 154,000 5,400 24,000 (5,000) (6,000) proportion of constructive gain on bond retirement recognized currently by separate affiliates ($24000/ 4 years) 8 impairment of goodwill -9 subsidiary income to be aportioned o noncontrolling interest proportionate share 51 Income to noncontrolling interest (25,000) 147,400 10% 14,740 + 63 Net income calculations 72 Net income Milestone One instructions Record the basic consolidation entry. Accounts Record the amortized excess value differential entry. Record the excess value (differential) reclassification entry. 13 Record the reversal of last year's deferral. 16 Record the deferral of the 20x7 unrealized profits on the inventory transfer. 20 Record the elimination of the intercompany holdings of Posey's bonds. 23 Record the entry to eliminate the intercompany interest receivables/payables. 26 Record the entry to eliminate the accrued interest on the intercompany bonds. E 29 Record the entry to eliminate the intercompany holdings of Stargell's bonds. II 32 Record the entry to eliminate the intercompany dividend payable/receivable