I am working on the adjusting entries for this consolidation statement. Under 'Investment in Small' there needs to be three credit adjustments: (S) Elimination of Small's stockholders' equity January 1 balances and the book value portion of investment account
(A) Allocation of Small's excess acquisition-date fair value over book value, unamortized balance as of beginning of year, and
(I) Elimination of parent's equity in subsidiary's income.
I'm ok with the A and I adjustments. I cannot figure the (S) adjustment. I need to know what numbers to use to come to an answer.
$ 1,153,550 583,000 157,000 (205,450 $ (520,000 $ (462,500) 93,500 148,000 Revenues (1,646,050) 681,500 344,550 Cost of goods sold Depreciation expense 9,550 Equity income of Small 206,450 Net income $ (216,000) $ (620,000) Retained earnings 111 $ (1,720,000 $ (642,000) (620,000 (216,000) Dividends declared 310,000 120,000 Retained earnings 12131 $ (2,030,000) $ (738,000) V 642,000 (1,720,000) (620,000) 310,000 (2,030,000) Net income (above) ll 120,000 '65 337,750 Investment in Small 1,162,250 Land 526,000 Buildings (net) 390,000 739,000 Current assets $ 334,000 11 ,900 $ 659,650 120,000 260,000 432,000 294,000 920,50 822,000 1 ,080,750 72,000 $ 3,555,1 00 O Equipment (net) Goodwill Total assets $ 3,155,000 $ 1,320,000 Liabilities $ (875,000 Common stock (250,000 (170,000 (2,030,000 (738,000 $ (3,155,000 $ (1,320,000 $ (412,000 V V (1,275,100) (250,000 (2,030,000 $ (3,555,100 V Retained earnings (above) s..- II II II 978,000 131,900 V Total liabilities and equity Giant acquired all of Small's common stock on January 1, 2014, in exchange for cash of $770,000. On that day, Small reported common stock of $170,000 and retained earnings of $400,000. At the acquisition date, $134,500 ofthe fair-value price was attributed to undervalued land while $95,500 was assigned to undervalued equipment having a 10-year remaining life. The $72,000 unallocated portion of the acquisition-date excess fair value over book value was viewed as goodwill. Over the next few years, Giant applied the equity method to the recording of this investment. Following are individual financial statements for the year ending December 31, 2018. On that date, Small owes Giant $11,900. Small declared and paid dividends in the same period. Credits are indicated by parentheses. Giant Small Revenues $(1,183,550) $ (462,500) Cost of goods sold 583,000 98,500 Depreciation expense 187,000 148,000 Equity in income of Small (206,450) 0 Net income M w Retained earnings, 1/1/15 $(1,720,000) $ (642,000) Net income (above) (620,000) (216,000) Dividends declared 310,000 120,000 Retained earnings, 12/31/15 $(2,030,000) $ (738,000) Current assets 5 337,750 $ 334,000 Investment in Small 1,162,250 0 Land 526,000 260,000 Buildings (net) 390,000 432,000 Equipment (net) 739,000 294,000 Goodwill o 0 Total assets $ 3,155,000 $ 1,320,000 Liabilities $ (875,000) $ (412,000) Common stock (250,000) (170,000) Retained earnings(above) (2,030,000) (738,000) Total liabilities and equities $(311551000) $(113201000) ' . How was the $206,450 Equity in Income of Small balance computed? Determine the totals to be reported by this business combination for the year ending December 31,2018. Prepare a consolidation worksheet for Giant and Small for the year ending December 31,2018. lf Giant determined that the entire amount of goodwill from its investment in Small was impaired in 2018, whatjournal entry would Giant make to record such impairment? :1an
