Advance Accounting Consolidation Worksheet and Consolidating Entries.

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Student Name: Instructor Class: McGraw-Hill Problem 05-35 Part A. Annual Excess Life in years Consideration transferred Noncontrolling interest fair value Subsidiary fair value at acquisition-date Book value Fair value in excess of book value Excess fair value assignment to customer list $ $ $ 570,000 380,000 950,000 Correct! (850,000) 100,000 Correct! 100,000 - Amort. 20 $ 5,000 Correct! Consolidation entries: Entry *TL Retained Earnings, 1/1/15 (Gibson) Land 40,000 To remove unrealized gain on intra-entity downstream transfer of land made in 2014. Entry *G Retained Earnings, 1/1/15 (Keller) Cost of Goods Sold 10,000 To defer unrealized upstream Inventory gross profit from 2014 until 2015. Entry *C Retained Earnings, 1/1/15 (Gibson) Investment in Keller 9,000 To record parent's share of amortization Entry S Common Stock (Keller Additional Paid-in Capital Retained Earnings, 1/1/15 (Keller) Investment in Keller Noncontrolling interest in Keller, 1/1/15 320,000 90,000 610,000 To remove stockholders' equity accounts of Keller and recognize beginning noncontrolling interest. Entry A Customer list Investment in Keller 95,000 Noncontrolling interest in Keller, 1/1/15 To recognize amount paid within acquisition price for the customer list. Entry I Equity in Earnings of Keller Investment in Keller 84,000 To eliminate intra-entity income accrual Entry D Investment in Keller Dividends Declared 36,000 To eliminate intra-entity dividend transfers Entry E Amortization Expense Customer list 5,000 To recognize current period excess amortization expense Entry P Liabilities Accounts Receivable 40,000 To eliminate intra-entity debt Entry TI Sales Cost of Goods Sold 200,000 To eliminate current year intra-entity inventory transfer Entry G Cost of Goods Sold Inventory 12,000 To defer 2015 unrealized inventory gross profit Net income attributable to noncontrolling interest Keller reported net income Excess fair value amortization 2014 intra-entity gross profit realized in 2015 2015 intra-entity gross profit deferred Keller realized income 2015 Outside ownership percentage Net income attributable to n noncontrolling interest $ $ $ 140,000 (5,000) 10,000 (12,000) 133,000 40% 53,200 Correct! GIBSON AND KELLER Consolidation Worksheet Year Ending December 31, 2015 Consolidation Entries Accounts Sales Gibson Keller (800,000) Debit (500,000) [TI] Credit 200,000 Cost of goods sold 500,000 300,000 [G] Operating expenses 100,000 60,000 [E] 5,000 - [I] 84,000 [*TL] 40,000 Equity in earnings of Keller Separate company net income (84,000) (284,000) 12,000 [*G] 10,000 [TI] 200,000 [D] 36,000 (140,000) Consolidated net income To noncontrolling interest - - To Gibson Retained earnings, 1/1/15 - Gibson (1,116,000) - Keller [*C] 9,000 (620,000) [*G] 10,000 [S] Net Income Dividends Retained earnings, 12/31 (284,000) 610,000 (140,000) 115,000 60,000 (1,285,000) (700,000) Cash 177,000 90,000 Accounts receivable 356,000 410,000 [P] 40,000 Inventory 440,000 320,000 [G] 12,000 Investment in Keller 726,000 36,000 [*C] 9,000 [D] Land 180,000 390,000 Buildings and equipment (net) 496,000 300,000 2,375,000 1,510,000 Customer list Total assets [A] 95,000 Liabilities (480,000) (400,000) [P] 40,000 Common stock (610,000) (320,000) [S] 320,000 (90,000) [S] 90,000 Additional paid-in capital Retained earnings, 12/31 (1,285,000) [S] 612,000 [I] 84,000 [A] 57,000 [*TL] 40,000 [E] 5,000 (700,000) Noncontrolling interest in NCI in Keller, 1/1 [S] 408,000 [A] 38,000 NCI in Keller, 12/31 Total liabilities and equity (2,375,000) (1,510,000) 1,551,000 1,551,000 Correct! Correct! Part b. How would the consolidation entries in requirement (a) have differed if Gibson had sold a building with a $ value (cost of $140,000) to Keller for $100,000 instead of land, as the problem reports? If the intra-entity transfer had been a building rather than land, two adjustments to the consolidation entries would be neede would be changed and relabeled as Entry *TA and an Entry ED would be added to eliminate the overstatement of depreciat for 2015. All other consolidation entries would be the same as shown in Part a. As a downstream transfer, entries *C and S affected. Entry Entry *TA Retained Earnings, 1/1/15 (Gibson) Buildings Accumulated Depreciation ED Accumulated Depreciation Operating (or Depreciation) Expense 36,000 40,000 4,000 Correct! Correct! 40,000 Correct! in 2014. Correct! 10,000 Correct! Correct! 9,000 Correct! Correct! Correct! Correct! 612,000 408,000 Correct! Correct! noncontrolling interest. Correct! 57,000 Correct! 38,000 Correct! Correct! 84,000 Correct! Correct! 36,000 Correct! Correct! 5,000 Correct! Correct! 40,000 Correct! Correct! 200,000 Correct! Correct! 12,000 Correct! Noncontrolling Consolidated Interest Totals (53,200) 24,000 (1,100,000) Correct! 602,000 Correct! 165,000 Correct! - Correct! (333,000) Correct! 53,200 Correct! (279,800) Correct! (1,067,000) Correct! - Correct! (279,800) Correct! 115,000 Correct! (1,231,800) Correct! 267,000 Correct! 726,000 Correct! 748,000 Correct! - Correct! 530,000 Correct! 796,000 Correct! 90,000 Correct! 3,157,000 Correct! (840,000) Correct! (610,000) Correct! - Correct! (1,231,800) Correct! (408,000) - Correct! (38,000) - Correct! (475,200) (475,200) Correct! Correct! (3,157,000) Correct! had sold a building with a $600,000 book dation entries would be needed. Entry *TL he overstatement of depreciation expense ream transfer, entries *C and S are not Correct! Correct! 76,000 Correct! Correct! 4,000 Correct! Given Data P05-35 Part a. facts: Gibson acquired interest in Keller 1/1/2014 Various considerations given for acquisition Fair value of noncontrolling interest at acquisition Keller's book value Value assigned to Keller customer list Keller customer list - life for purposes of amortization Book value of land Gibson sold to Keller on 1/2/2014 Price paid by Keller for Gibson's land Cost of inventory shipped by Keller to Gibson in 2014 Price paid by Gibson for 2014 inventory Cost of intra-entity shipments by Keller to Gibson in 2015 Price paid by Gibson for 2015 intra-entity shipments Percentage of inventory resold in period following transfer Amount Gibson owes Keller at end of 2015 Part b. facts: Building sold to Keller instead of land Book value of building Gibson sold to Keller Price paid by Keller for Gibson building Cost of building Remaining life at date of transfer $ $ $ $ $ $ $ $ $ $ $ $ $ $ 60% 570,000 380,000 850,000 100,000 20 60,000 100,000 100,000 150,000 140,000 200,000 20% 40,000 60,000 100,000 140,000 10 Sales Cost of goods sold Operating expenses Equity in earnings of Keller Company Net income Gibson Keller Company Company $ (800,000) $ (500,000) 500,000 300,000 100,000 60,000 (84,000) $ (284,000) $ (140,000) Retained earnings, 1/1/15 Net income Dividends declared Retained earnings, 12/31/15 $ (1,116,000) $ (284,000) 115,000 $ (1,285,000) $ Cash Accounts receivable Inventory Investment in Keller Company Land Buildings and equipment (net) Total assets $ Liabilities Common stock Additional paid-in capital Retained earnings, 12/31/15 $ $ (620,000) (140,000) 60,000 (700,000) 177,000 $ 316,000 440,000 766,000 180,000 496,000 2,375,000 $ 90,000 410,000 320,000 390,000 300,000 1,510,000 (480,000) $ (610,000) (1,285,000) (400,000) (320,000) (90,000) (700,000) Total liabilities and equities $ (2,375,000) $ (1,510,000)