MidStrata Corporation acquired 75% of the voting shares of Atoom Company on January 1, 20X1. The fair value of

the non-controlling interest at acquisition was equal to its proportionate share of the fair value of the net assets of

Atoom. The full amount of the differential at acquisition was attributable to buildings and equipment, which had a

remaining useful life of eight years. Financial statement data for the two companies and the consolidated entity at

December 31, 20X6, are as follows:

Item

Total Assets

Total Liabilities & Equity

$ ?

?

$320,000 $

$ 320,000 ?

MIDSTRATA CORPORATION AND ATOOM COMPANY

Balance Sheet Data

December 31, 20X6

MidStrata Corporation Atoom Company Consolidated Entity

Cash $ 67,000 $ 45,000 $ 112,000

Account Receivable ? 55,000 145,000 Inventory 125,000 90,000 211,000

Buildings & Equipment 400,000 240,000 680,000

Less: Accumulated Depreciation (180,000) (110,000) (?)

Investment in Atoom Company ?

Accounts Payable $ 86,000 $ 20,000 $ 89,000

Other Payables ? 8,000 ?

Notes Payable 250,000 120,000 370,000

Common Stock 120,000 60,000 120,000

Retained Earnings 172,500 112,000 172,500

Non-controlling Interest 44,500

MIDSTRATA CORPORATION AND ATOOM COMPANY

Income Statement Data

For the Year Ended December 31, 20X6

Item MidStrata Corporation Atoom Company Consolidated Entity

Sales $420,000 $ 260,000 $ 650,000

Income from Atoom Company 32,250

Total Income $452,250 $260,000 $650,000

Cost of Goods Sold $310,000 $170,000 $445,000

Depreciation Expense 20,000 25,000 50,000

Interest Expense 25,000 9,500 34,500

Other Expenses 22,000 15,500 37,500

Total Expenses ($377,000) ($220,000) ($567,000)

Consolidated Net Income $ 83,000

Income to Noncontrolling Interest (7,750)

Controlling Interest in Net Income $ 75,250 $ 40,000 $ 75,250

Group Case Study

ACCT 4001

All unrealized profit on intercompany inventory sales on January 1, 20X6, were eliminated on MidStratas books.

All unrealized inventory profits at December 31, 20X6, were eliminated on Atooms books. Assume MidStrata uses

the fully adjusted equity method and that MidStrata does not make the optional depreciation consolidation

worksheet entry.

Required: a)

b)

entry)? c)

d) e) f) g) h) i)

For the buildings and equipment held by Atoom when MidStrata acquired it and still on hand on

December 31, 20X6, by what amount had buildings and equipment increased in value from their

acquisition to the date of combination with MidStrata?

What amount should be reported as accumulated depreciation for the consolidated entity at December

31, 20X6 (assuming MidStrata does not make the optional accumulated depreciation consolidation

If Atoom reported capital stock outstanding of $60,000 and retained earnings of $30,000 on January 1,

20X1, what amount did MidStrata pay to acquire its ownership of Atoom?

What balance does MidStrata report as its investment in Atoom at December 31, 20X6?

What amount of intercorporate sales of inventory occurred in 20X6?

What amount of unrealized inventory profit exists at December 31, 20X6?

Give the consolidation entry used in eliminating intercompany inventory sales during 20X6.

What was the amount of unrealized inventory profit at January 1, 20X6?

What balance in accounts receivable did MidStrata report at December 31, 20X6?