Question
Balch acquired 80 percent of Birch's outstanding shares on January 1, 2016, in exchange for $369,000 in cash. The subsidiary's stockholders' equity accounts totaled $353,000
Balch acquired 80 percent of Birch's outstanding shares on January 1, 2016, in exchange for $369,000 in cash. The subsidiary's stockholders' equity accounts totaled $353,000 and the noncontrolling interest had a fair value of $92,250 on that day. However, a building (with a ten-year remaining life) in Birch's accounting records was undervalued by $19,000. Balch assigned the rest of the excess fair value over book value to Birch's patented technology (five-year remaining life).
Year | Cost to Birch | Transfer Price to Balch | Inventory Remaining at Year-End (at transfer price) |
2016 | 72,000 | 130,000 | 28,000 |
2017 | 97,500 | 150,000 | 40,500 |
2018 | 87,500 | 175,000 | 50,000 |
At December 31, 2018, Balch owes Birch $19,000 for inventory acquired during the period.
The following separate account balances are for these two companies for December 31, 2018, and the year then ended. Note: Parentheses indicate a credit balance.
Accounts | Balch | Birch | |||
Sales revenues | $ (868,000) | $ (381,000) | |||
Cost of goods sold | 518,000 | 212,000 | |||
Depreciation Expense | 86,500 | 34,000 | |||
Amortization Expense | - | - | |||
Other Expenses | 99,200 | 30,000 | |||
Equity in earnings of Birch | (59,540) | - | |||
Net income | $ (223,840) | $ (105,000) | |||
Retained earnings, 1/1/18 | $ (494,000) | $ (284,000) | |||
Net income (above) | (223,840) | (105,000) | |||
Dividends declared | 132,000 | 22,000 | |||
Retained earnings, 12/31/18 | $ (585,840) | $ (367,000) | |||
Cash and receivables | $ 149,000 | $ 101,000 | |||
Inventory | 270,000 | 151,000 | |||
Investment in Birch | 456,000 | - | |||
Land, buildings, and equipment (net) | 967,000 | 331,000 | |||
Patented Technology | - | - | |||
Total assets | $ 1,842,000 | $ 583,000 | |||
Liabilities | $ (726,160) | $ (37,000) | |||
Common stock | (530,000) | (179,000) | |||
Retained earnings, 12/31/18 | (585,840) | (367,000) | |||
Total liabilities and equity | $(1,842,000) | $ (583,000) | |||
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complete the consolidation worksheet for December 31, 2018.
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