Background:

• You recently accepted the controller position for Java the Hut, a regional coffee chain.
• The owner informs you that a complete financial statement package will be required as part of a new bank loan compliance requirements ("covenants").
• Prior to your arrival, the company had one accountant and relied heavily on the auditors in the preparation of financial statements. With the new controller position, the expectation is that you will assume the preparation of financial statements.
• On your first day of work on April 1, 2018, the Java the Hut accountant informs you that there were a number of transactions in the first quarter of 2018 that she was unsure of the appropriate accounting.Consequently, she recorded the cash activity in the Other Assets - Holding account as a temporary holding account. The good news is that the Java the Hut accountant maintained excellent details of the various transactions and has a series of supporting schedules for you.
• The project reflects a "real-life" challenge in that you are responsible for accounting issues months following the actual transaction. In this case, an acquisition was completed on 1/1, and you are now responsible for acquisition accounting consolidated financial statements for the first three months (first quarter of 2018).

Objective #5: Prepare Consolidating Worksheets for the Income Statement and Balance Sheet.

1. Prepare journal entries to recognize the intercompany transactions and eliminations identified in Schedule 6. Any supporting calculations should be included.
2. Prepare the consolidating worksheet for the income statement (first quarter of 2018) and for the balance sheet (as of March 31, 2018).
   1. All adjustments included in the steps to this point should be included.
   2. It is recommended that you utilize the consolidating worksheet formats we will cover in class.
   3. Consolidating worksheets should utilize spreadsheet software.

Schedule 3 Trial Balance of New Castle Coffee as of 3/31/18 Accounts Debit Credit Checking S 1,500 Money Market Account S 3,000 Accounts Receivable S 21,000 Allowance for Uncollectable Accounts S 2,875 Inventory $ 13,765 Prepaid Rent - Current 3,750 Land 50,000 Building 85,000 Equipment 48,000 Construction in Process 16,000 Accumulated Depreciation $ 16,281 Debt Set-up Costs, net 4,687 Accounts Payable 12,800 Accrued Payroll and Benefits 6,000 Accrued Expenses 5,673 Income Tax Payable 1,500 Notes Payable (12/31/16) 160,000 Advance Payable - Java 8,000 Deferred Tax Liability 3,800 Common Stock (1,000 shares O/S, $1 par) 1,000 Additional Paid-In Capital 74,000 Retained Earnings (Loss) - Beginning 5,700 Sales - Coffee 65,000 Sales - Beans 25,000 Sales - Other 8,000 Allowance for Returns - Beans 1,000 Allowance for Returns - Other 400 Cost of Goods Sold - Coffee 39,000 Cost of Goods Sold - Beans 10,000 Cost of Goods Sold - Other 3,600 Selling Expenses 6,000 Professional Fees 4,800 Depreciation - Building (30 years) 31 Depreciation - Equipment (10 years) 1,250 Bad Debt Expense 600 Administrative Salaries 12,000 Other SG&A Expenses 4,000 Interest Income - Money Market S 15 Interest Expense - Notes Payable 2,000 Interest Expense - Amortization of Debt Set-Up 313 Income Tax Provision 4,948 Totals $ 336,644 $ 336,644Schedule 4 Trial Balance of Java the Hut as of 12/31/17 Accounts Debit Credit Checking S 800 Money Market Account 18,600 Accounts Receivable 46,800 Allowance for Uncollectable Accounts S 936 Inventory 51,250 Prepaid Rent - Current 300 Land $ : Building $ 155,000 Equipment 98,000 Construction in Process 4.800 Accumulated Depreciation $ 54,275 Debt Set-up Costs, net $ 12,000 Accounts Payable 47,250 Accrued Payroll and Benefits 13,200 Accrued Expenses 8,900 Income Tax Payable Notes Payable (12/31/21) $ 174000 Advance Payable - Java Revolving credit loan (committed to 12/31/20) $ 27,749 Deferred Tax Liability 4,440 Common Stock (1,000 shares O/S, $1 par) 100,000 Additional Paid-In Capital $ 125,000 Retained Earnings (Loss) - Beginning 18,500 Sales - Coffee Sales - Beans Sales - Other Allowance for Returns - Beans Allowance for Returns - Other Cost of Goods Sold - Coffee Cost of Goods Sold - Beans Cost of Goods Sold - Other Selling Expenses Professional Fees Depreciation - Building (30 years) Depreciation - Equipment (10 years) Bad Debt Expense Administrative Salaries Other SG&A Expenses Interest Income - Money Market Interest Expense - Notes Payable Interest Expense - Amortization of Debt Set-Up Income Tax Provision Totals $ 572.550 $ 575,250Schedule 5 Trial Balance of Java the Hut as of 3/31/18 Accounts Debit Credit Checking 1,500 Money Market Account 8,000 Accounts Receivable 48,000 Allowance for Uncollectible Accounts S 960 Inventory 54,024 Deferred Tax Asset 3,197 Land 185,000 Building 155,000 Equipment 98,000 Construction in Progress 25,200 Accumulated Depreciation 58,017 Debt Set-Up Costs, Net 11,000 Advanced Receivable - NCC 8,000 Other Assets - Holding 210,000 Accounts Payable 48,200 Accrued Payroll and Benefits 11,000 Accrued Expenses 3, 196 Notes Payable (12/31/16) 175,000 Revolving Credit Loan 236,421 Deferred Tax Liability (LT) 4,900 Common Stock (10,000 Shares O/S, $10 Par) 100,000 Additional Paid-In Capital 125,000 Retained Earnings (Loss) - Beginning 18,500 Sales - Coffee 165,000 Sales - Beans 65,400 Sales - Other 16,500 Allowance for Returns - Beans 3,500 Allowance for Returns - Other 650 Cost of Goods Sold - Coffee 107,250 Cost of Goods Sold - Beans 29,430 Cost of Goods Sold - Other 7,425 Selling Expenses 14,800 Professional Fees 8,01 Depreciation - Building (30 years) 1,292 Depreciation - Equipment (10 years) 2,450 Bad Debt Expense 200 Administrative Salaries 26,500 Other SG&A Expenses 9,396 Interest Income - Money Market S 40 Interest Expense - Note Payable 3,500 Interest Expense - Revolving Credit 5,319 Interest Expense - Amortization of Debt Set-Up 1,000 Income Tax Provision 10,484 Totals $ 1,038,134 $ 1,038,134Advanced Accounting 1 - Consolidation Worksheet Income Statement Java the Hut New Castle Coffee Adjusting Entries Adjusted T/B Eliminating Entries Consolidated Net Income Item Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Sales . Coffee S Sales . Bears Sales . Other ts S Allowance for Returns . beans Allowance for Returns . other Cost of goods sold . coffee Cost of goods sold . beans Cost of goods sold . other Selling expenses Professional fees Depreciation . Bida Depreciation . Equipment Bad debt expense Administrative salaries Other SG&.A expenses Interest income money market Interest expense . note payable Interest expense . Revolving Credit Interest Exp. Amortization of debt set up Acqubition expense Income tax provision Income from Newark Coffee Net Income (Loss) Statement of Retained Earnings Java the Hut New Castle Coffee Adjusting Entries Adjusted T/ B Eliminating Entries Consolidated Retained Earnings Item Dr. Cr. Dr. Dr. Cr. Dr. Cr Dr. Cr. Dr. Cr. Retained earnings, beginning Net income from above Dividends Declared Retained earnings . ending Balance Sheet Java the Hut New Castle Coffee Adjusting Entries Adjusted T/B Eliminating Entries Consolidated Balance Sheet Item Dr. Cr. Dr. C. Dr. Cr. Dr. Cr . Dr. Cr. Dr. Checking Cr. S Money market account S Accounts Receivable Allowance for uncollectible accounts S Inventory Prepaid Rent S SStatement of Retained Earnings Java the Hut New Castle Coffee Adjusting Entries Adjusted T/ B Eliminating Entries Consolidated Retained Earnings Item Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr Retained earnings, beginning S S Net income from above Dividends Declared Retained earnings - ending Balance Sheet Java the Hut New Castle Coffee Adjusting Entries Adjusted T/B Eliminating Entries Consolidated Balance Sheet Item Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Checking Cr. Money market account Accounts Receivable Allowance for uncollectible accounts Inventory Prepaid Rent Deferred tax asset Land Building Equipment Construction in progress Accumulated Depreciation Debt set up costs, net Advance Receivable Investment in New Castle Coffee Investment in Newark Coffee Goodwill Other assets . holding Total Assets Accounts payable Accrued payroll and benefits Accrued expenses Income Tax Payable Notes payable Advance payable Revolving credit loan Deferred tax liability (long term) Common Stock Additional paid in capital Retained earnings Total Liabilities & Stockholders Equity