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Following are the individual financial statements for Gibson and Davis for the year ending December 31, 2018: Gibson Davis Sales $ (827,000 ) $ (372,000

Following are the individual financial statements for Gibson and Davis for the year ending December 31, 2018:

Gibson Davis
Sales $ (827,000 ) $ (372,000 )
Cost of goods sold 392,000 172,000
Operating expenses 224,000 83,000
Dividend income (12,000 ) 0
Net income $ (223,000 ) $ (117,000 )
Retained earnings, 1/1/18 $ (710,000 ) $ (408,000 )
Net income (223,000 ) (117,000 )
Dividends declared 70,000 20,000
Retained earnings, 12/31/18 $ (863,000 ) $ (505,000 )
Cash and receivables $ 162,250 $ 87,000
Inventory 596,000 227,000
Investment in Davis 558,750 0
Buildings (net) 573,000 664,000
Equipment (net) 409,000 434,000
Total assets $ 2,299,000 $ 1,412,000
Liabilities $ (806,000 ) $ (567,000 )
Common stock (630,000 ) (340,000 )
Retained earnings, 12/31/18 (863,000 ) (505,000 )
Total liabilities and stockholders' equity $ (2,299,000 ) $ (1,412,000 )

Gibson acquired 60 percent of Davis on April 1, 2018, for $558,750. On that date, equipment owned by Davis (with a five-year remaining life) was overvalued by $63,000. Also on that date, the fair value of the 40 percent noncontrolling interest was $372,500. Davis earned income evenly during the year but declared the $40,000 dividend on November 1, 2018.

  1. Prepare a consolidated income statement for the year ending December 31, 2018.

  2. Determine the consolidated balance for each of the following accounts as of December 31, 2018:

  • Goodwill
  • Equipment (net)
  • Common stock
  • Buildings (net)
  • Dividends declared
  1. Prepare a consolidated income statement for the year ending December 31, 2018.

  2. Determine the consolidated balance for each of the following accounts as of December 31, 2018:

  • Goodwill
  • Equipment (net)
  • Common stock
  • Buildings (net)
  • Dividends declared

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