Company Background:

Florida Chocolate Inc. was first opened as a sole proprietor in 20x2 under the name Alexandrias Chocolates. The company produced 4 specialty chocolate products using an old family recipe, which only the owner, Alexandria Vierra, knows. The company started as a small homebased business.

In 20x4 Alexandria decided to expand the business, opened a factory in Ft. Lauderdale Florida and converted the business to a corporation named Florida Chocolate Inc. Due to the huge success of the business she decided to expand to Europe in 20x6, opening another factory in England. This factory is run by Alexandrias brother Nelson. The third factory was open in Brazil in 20x9 and is run by Alexandrias sister Laura.

Project Information:

*The recording currency and functional currency of Florida Chocolate Inc. is the U.S. Dollar.

On January 1, 20x6 Florida Chocolate Inc acquired 100% of Brazil Cos outstanding stock to open a factory in Brazil. The following facts relate to the acquisition:

Florida Chocolate Inc paid $1,000,000 cash for Brazil Co Industries.

On January 1, 20x6, Brazil Co had the following assets and liabilities on its balance sheet: Cash - $375,000, Inventory - $1,000,000, Land - $100,000, Buildings & equipment - $625,000, Accounts Payable - $300,000, and Notes Payable - $1,500,000.

Fair market values of all Brazil Co' assets and liabilities approximate their costs with the exception of:

Inventory - $950,000

Land - $300,000

Buildings & Equipment - $975,000

For the year ended December 31, 20x6, Florida Chocolate Inc had the following other assets and liabilities on its balance sheet: Cash - $825,000, Inventory - $1,250,000, Land - $500,000, Buildings & equipment - $1,500,000, Accounts payable - $500,000, Notes payable - $2,000,000. Retained earnings before closing the income statement was $2,500,000.

Florida Chocolate Inc. received income from Brazil Co of $125,000, and dividends from Brazil Co of $50,000.

Florida Chocolate Inc 's sales for the year were $3,000,000. Cost of goods sold was $1,900,000, and its operating expenses were $875,000.

Brazil Co' sales for the year were $1,000,000. Cost of goods sold was $650,000, and its operating expenses were $225,000.

Assume that net income increased Brazil Co' cash balances. Dividends were paid out of Brazil Co' cash balances.

Ignore amortization expense. There were no intercompany transactions between Florida Chocolate Inc. and Brazil Co during 20x6.

Part 1:

This week's assignment will be a draft of Part 1 of the portfolio project. The final version of Part 1 of the project is due, along with Part 2, in their final versions, with Part 3 as the Portfolio Project for this class.

Prepare the allocation schedule, consolidation worksheet, and journal entries for the initial consolidation with Brazil Co. in 20x6. Prepare the journal entries required at year-end, and the consolidation entries. (Assume Brazil uses the U.S. Dollar as their recording and functional currency.)