J L Module 6 Live Session 2 Consolidation with NCI Pop Co. acquired on the open market 80 percent of the outstanding common stock of Star Co. on January 1, 2018, for $1,416,000. An independent appraisal indicated that the remaining 20% interest in Star is worth $354,000. The fair values of the identiable net assets of Star are equal to their book values except for the following: Account Book Value Fair Value Inventories $ 350,000 $ 260,000 Land 388,000 408,000 Patents 160,000 210,000 Long-term notes payable (100,000) (90,000) Addition a] Inform ation - The transactions qualied as a taxable acquisition. - Both companies use the FIFO inventory method and sell all of their inventories at least once per year. - Star's long-term notes payable are interest bearing and are due in full on December 31, 2027. Premiums and discounts are amortized using the straight-line method. ' The patents have a 10-year remaining useful life. 0 Both companies depreciate and amortize their depreciable assets using the straight-line method. ' On January 1, 2018, Star sold equipment with an original cost of $100,000 and a carrying value of $57,000 to Pop for $36,000. The equipment had a remaining life ofthree years ' During 2018, Star sold merchandise to Pop for $60,000, which included profit of $20,000. At December 31, 2018, half of this merchandise remained in Pop's inventory. - During 2018, Pop sold merchandise to Star for $50,000. Star sold all ofthese goods to non-afliates during 2018. At December 31, 2018, Star still owed Pop payment for half of the intercompany purchases that occurred during 2018. - No shares were issued by Pop and Star in 2018. - In its separate financial statements Pop accounts for its investment in Star using the cost method. The separate nancial statements of Pop and Star on December 31, 2018 are presented on page 2. MICHAEL KUSTANUVICH Income statement Pop Star Dr Cr Consolidated F-s Sales 525,000 475,000 Cost of Goods Sold (225,000) (410,000) Depreciation and amortization expense (45,000) (25,000) Interest Expense (67,500) (8,000) Other Income 81 (Expenses) (75,000) (20,000) Dividend Income 42,000 5,000 Consolidated Net Income 154,500 17,000 NCI's share of Net Income - - Controlling interest share of Net Income 154,500 17,000 Retained Earnings 111l2018 312,000 375,000 Net Income in 2018 154,500 17,000 Dividends Declared (36,000) (15,000) Ending Retained Earnings 430,500 377,000 Cash 50,000 100,000 Short-tenn receivables 34,000 50,000 Inventories 350,000 320,000 Buildings and equipment, net 310,000 519,000 Land 200,000 388,000 Patents - 144,000 Other assets 375,000 100,000 Goodwill - - Investment in Star 1,416,000 Total Assets 2,735,000 1,621,000 Accounts payable 273,500 144,000 Long-Term Notes payable 1,225,000 100,000 Common stock 306,000 200,000 Additional paid in capital 500,000 800,000 Retained earnings 430,500 377,000 Noncontrolling interest - - Total Liabilities and Equity 2,735,000 1,621,000 MICHAEL KUSTANOVICH (4) Complete the consolidated spreadsheet and record the consolidation journal entry on 12131/2018