Consolidation 40 points On January 1, 2016, Prange Company acquired 90% of the common stock of Seaman Company for $540,000. On this date Seaman had total owners' equity of $400,000. Any excess of cost over book value is attributable to a patent, which is to be amortized over 10 years. During 2016 and 2017, Prange has appropriately accounted for its investment in Seaman using the simple equity method. On January 1, 2017, Prange held merchandise acquired from Seaman for $30,000. During 2017, Seaman sold merchandise to Prange for $100,000, of which $20,000 is held by Prange on December 31, 2017. Seaman's gross profit on all sales is 40%. On December 31, 2017, Prange still owes Seaman $20,000 for merchandise acquired in December. Required: Complete the worksheet for consolidated financial statements for the year ended December 31, 2017, including journal entries written out in JE form. You may insert a new tab (and copy a template from your electronic workpapers) for your solution. Inventory Other current assets Prange 100,000 207,000 Seaman 105,000 325,000 Investment in Seaman 639,000 Land Buildings and Equipment Accumulated depreciation Patent 152,000 310,000 (210,000) 20,000 80,000 340,000 (130,000) Current liabilities Other long-term liabilities (105,000) (200,000) (70,000) (140,000) Common stock - Prange PIC - Prange Retained earnings - Prange (200,000) (100,000) (492,000) Common stock - Seaman PIC - Seaman Retained earnings - Seaman (150,000) (100,000) (200,000) Net sales Cost of goods sold (600,000) 360,000 (380,000) 228,000 Operating expenses 140,000 62,000 Subsidiary income Dividends - Prange Dividends - Seaman (81,000) 60,000 30,000 Consolidation 40 points On January 1, 2016, Prange Company acquired 90% of the common stock of Seaman Company for $540,000. On this date Seaman had total owners' equity of $400,000. Any excess of cost over book value is attributable to a patent, which is to be amortized over 10 years. During 2016 and 2017, Prange has appropriately accounted for its investment in Seaman using the simple equity method. On January 1, 2017, Prange held merchandise acquired from Seaman for $30,000. During 2017, Seaman sold merchandise to Prange for $100,000, of which $20,000 is held by Prange on December 31, 2017. Seaman's gross profit on all sales is 40%. On December 31, 2017, Prange still owes Seaman $20,000 for merchandise acquired in December. Required: Complete the worksheet for consolidated financial statements for the year ended December 31, 2017, including journal entries written out in JE form. You may insert a new tab (and copy a template from your electronic workpapers) for your solution. Inventory Other current assets Prange 100,000 207,000 Seaman 105,000 325,000 Investment in Seaman 639,000 Land Buildings and Equipment Accumulated depreciation Patent 152,000 310,000 (210,000) 20,000 80,000 340,000 (130,000) Current liabilities Other long-term liabilities (105,000) (200,000) (70,000) (140,000) Common stock - Prange PIC - Prange Retained earnings - Prange (200,000) (100,000) (492,000) Common stock - Seaman PIC - Seaman Retained earnings - Seaman (150,000) (100,000) (200,000) Net sales Cost of goods sold (600,000) 360,000 (380,000) 228,000 Operating expenses 140,000 62,000 Subsidiary income Dividends - Prange Dividends - Seaman (81,000) 60,000 30,000
