Consolidation - Peter Company and Subsidiary

The individual financial statements for Peter Company and Smith Co. for the year ended December 31, 2017, are attached in the Excel spreadsheet.Peter acquired a 91 percent interest in Smith on January 1, 2016, in exchange for various considerations totaling $1,078,350.At the acquisition date, the fair value of the non-controlling interest was $106,650 and Smith's book value was $677,000.Smith had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $335,000.This customer list is being amortized over 10 years.

Peter sold Smith a building with a $113,000 book value (cost of $275,000) for $135,000, with a remaining life of 10 years on January 2, 2016.In addition, on January 2, 2017, Peter reports $1,000,000 in bonds outstanding with a book value of $925,000, with a 4.0% coupon rate.Smith purchased 50 percent of these bonds on the open market at a price of $410,000 on that date.The Bonds come due December 31, 2019.

Smith transfers inventory to Peter on a regular basis.In 2016, Smith shipped inventory costing $171,000 to Peter at a price of $225,000.During 2017, Smith shipped goods totaling $267,000, which cost Smith $197,580.In year-ended 2016, 35% of the goods, and in year-ended 2017 40% of the goods, had not been resold to third parties by the end of the year.In addition, at the end of 2017, Peter owes Smith $32,000 due to these shipments.

1) Do the "schedule" that allocates the purchase price and determines the amount of Goodwill, if any.

2)All the consolidation worksheet adjustment entries for 2017, including any supporting schedules as necessary.) as follows:

S, A, I, D, E entries

P, G, *G, TI entries

*TA, ED entries

Bonds entry

*C entry

Supporting schedules should include:

i.the calculation of the non-controlling interest in the income of Smith

ii.the non-controlling interest in the assets of Smith

iii.schedule supporting the Bond calculations for entry B

iv.schedule supporting the gross profit in inventory elimination

v.and the support for the *C entry

3)Consolidation worksheet that includes the proper posting of the worksheet entries.

4)Additional information:

Income in 2016 reported by Smith was $262,000;

Dividends paid in 2016 by Smith was $42,000.

Accounts Sales Cogs Expenses Interest expense - bonds Interest income - bond investmen Equity in Smith Income Separate company net income Working Paper for Consolidated Statements - 12/31/17 Consolidation Entries Peter Smith Debit Credit (3,128,500) (1,102,000) 1,925,600 687,500 219,000 65,000 (338,520) (1,257,420) Noncontrolling Consolidated 92,500 (50,000) (372,000) Consolidated net income NCI in Smith Income Controlling interest in Cons Net Income Retained Earnings 1/1 (625,000) Retained Earnings 1/1 (487,000) Net Income (1,257,420) (372,000) Dividends paid Retained Earnings 12/31 115,000 (1,767,420) 40,000 (819,000) Final Problem-form Accounts Cash Receivables Inventory Investment in Smith Investment in Peter bonds Land Buildings, and equip, net Total Assets Current liabilities Bonds payable Discount on bonds NonControlling Interest in Smith Working Paper for Consolidated Statements - 12/31/17 Consolidation Entries Peter Smith Debit Credit 177,000 118,000 625,700 220,400 673,960 240,625 1,580,670 - 344,090 522,100 440,000 529,975 300,000 3,923,520 1,849,000 (596,100) (1,000,000) 50,000 (620,000) Common Stock Additional Paid-In-Capital (610,000) (320,000) (90,000) Retained Earnings 12/31 Total Liab. and SE (1,767,420) (3,923,520) (819,000) (1,849,000) Noncontrolling Consolidated - - - - Final Problem-form