Consolidation case cost method

Practice Problem On January 1, 2014, Plant Company purchased 80% of the common stock of Sun Company for $775,000. Sun reported the following: Income Dividends 2014 $350,000 $45,000 2015 $360,000 $55,000 2016 $325,000 $65,000 On December 31, 2013, just prior to the acquisition, the balance sheets of Plant Company and Sun Company were as follows: Cash Accounts receivable (net) Inventory Plant $1,650,000 400,000 600,000 900,000 $3,550,000 Sun (Book) $515,000 190,000 125,000 100,000 $930,000 Sun (Market) $515,000 190,000 125,000 150,000 $980,000 Land $230,000 No amortization required Liabilities Common stock Additional paid in capital Retained earnings $0 500,000 250,000 2.800.000 $3,550,000 $200,000 300,000 100,000 330,000 $930,000 Required: 1. Assume that Plant accounts for the acquisition using the Initial Value method (i.e., the Cost method). Use the information above as well as the appropriate incomplete worksheet information to consolidate the financial statements for Plant and Sun for 2014, 2015 and 2016. Please provide all the same information as #1 above. In working the consolidations, please provide the following information: The Equity method entries that Plant would make each year The Allocation Schedule to allocate excess fair values The consolidation entries - The Completed worksheets showing the consolidated totals 12/31/14 Trial Balances DI Sun Eliminations & Adjustment Consolidated Debit Credit alance Sheet Cost Method Entries Plant Co. FV Allocation INCOME STATEMENT Net sales Cost of sales Other expenses Dividend Income Consolidated NI To NCI To Controlling Interest 800,000 410,000 215,000 36,000 211,000 650,000 250,000 50,000 350,000 C* - Convert to Equity STATEMENT OF RETAINED EARNINGS Retained earnings, January 2,800,000 211,000 Divs 50,000 NI 330,000 350,000 45,000 End RE 2,961,000 635,000 S - Stockholder's Equity BALANCE SHEET Cash Accounts receivable net Inventory Land Goodwill Investment in Sun 1,433,000 425,000 800,000 900,000 735,000 230,000 270,000 100,000 775,000 A- Allocations Total Assets 4,333,000 1,335,000 Liabilities Common stock Other paid in capital Retained Earnings NCI 622,000 500,000 250,000 2,961,000 300,000 300,000 100,000 635,000 I - Income Elimination Total L+E 4,333,000 1,335,000 D - Div Elimination E - Expense Allocation Practice Problem On January 1, 2014, Plant Company purchased 80% of the common stock of Sun Company for $775,000. Sun reported the following: Income Dividends 2014 $350,000 $45,000 2015 $360,000 $55,000 2016 $325,000 $65,000 On December 31, 2013, just prior to the acquisition, the balance sheets of Plant Company and Sun Company were as follows: Cash Accounts receivable (net) Inventory Plant $1,650,000 400,000 600,000 900,000 $3,550,000 Sun (Book) $515,000 190,000 125,000 100,000 $930,000 Sun (Market) $515,000 190,000 125,000 150,000 $980,000 Land $230,000 No amortization required Liabilities Common stock Additional paid in capital Retained earnings $0 500,000 250,000 2.800.000 $3,550,000 $200,000 300,000 100,000 330,000 $930,000 Required: 1. Assume that Plant accounts for the acquisition using the Initial Value method (i.e., the Cost method). Use the information above as well as the appropriate incomplete worksheet information to consolidate the financial statements for Plant and Sun for 2014, 2015 and 2016. Please provide all the same information as #1 above. In working the consolidations, please provide the following information: The Equity method entries that Plant would make each year The Allocation Schedule to allocate excess fair values The consolidation entries - The Completed worksheets showing the consolidated totals 12/31/14 Trial Balances DI Sun Eliminations & Adjustment Consolidated Debit Credit alance Sheet Cost Method Entries Plant Co. FV Allocation INCOME STATEMENT Net sales Cost of sales Other expenses Dividend Income Consolidated NI To NCI To Controlling Interest 800,000 410,000 215,000 36,000 211,000 650,000 250,000 50,000 350,000 C* - Convert to Equity STATEMENT OF RETAINED EARNINGS Retained earnings, January 2,800,000 211,000 Divs 50,000 NI 330,000 350,000 45,000 End RE 2,961,000 635,000 S - Stockholder's Equity BALANCE SHEET Cash Accounts receivable net Inventory Land Goodwill Investment in Sun 1,433,000 425,000 800,000 900,000 735,000 230,000 270,000 100,000 775,000 A- Allocations Total Assets 4,333,000 1,335,000 Liabilities Common stock Other paid in capital Retained Earnings NCI 622,000 500,000 250,000 2,961,000 300,000 300,000 100,000 635,000 I - Income Elimination Total L+E 4,333,000 1,335,000 D - Div Elimination E - Expense Allocation