On January 1, 2014, Palmer Company acquired a 90% interest in Stevens Company at a cost of $1,000,000 cash. An examination of Stevens Company's assets and liabilities revealed the following at the date of acquisition:

Solution: ( consolidated balance sheet January 1 , 2016)

Prepare the eliminating/adjusting entries needed on the consolidated worksheet for the year ended 2016 using the COST method.

Palmer Company Date of Acquisition -January 1, 2014 Parent General Ledger Stevens Company Balance Sheet Book Value As of January 1, 2014 Cash 1,179,300 Book Value Fair Value Accounts receivable 130,726 187,600 Cash 130,726 200,000 210,000 Note receivable 40,000 Accounts receivable 200,000 Inventory 130,400 Inventories 160,000 300,000 Advance to S 35,000 Equipment 390,000 Equipment Accumulated depreciation 450,000 (250,000) Accumulated depreciat (100,000) (130,000) 190,000 Land 290,000 160,000 Land Other 54,830 54,830 Total 1,932,300 Total assets 935,556 Note payable Accounts payable 270,500 40,000 40,000 400,000 Bonds payable Common stock 205,556 150,000 Other contributed capital 500,000 1,000,000 Common stock Retained earnings Retained earnings 261,800 190,000 Total 1,932,300 Total liabilities and e 935,556 Additional Information Date of Acquisition Your department has noted the following transactions of interest between Palmer and Stevens: a) Stevens Company has not yet recorded the S35,000 cash advance from Palmer Company 2 b) Stevens Company's accounts receivable include $20,000 due from Palmer Company. Stevens Company's $40,000 note payable is payable to Palmer Company. c) 1 1 Additional Information-Date of Acquisition Stevens Company's equipment had an original life of 15 years and a remaining useful life of 10 years. All the inventory was sold in 2014. Stevens Company purchased back its bonds payable on the open market on January 10, 2014, for $150,000 and recognized a gain of $55,556 Subsidiary Company Noncontrolling Parent Eliminations Consolidated Company Dr. Interest Balance 35,000 Cash 179.300 130,726 3a 345.026 Accounts Receivable 187,600 20,000 200,000 30 367,600 Note Receivable 40.000 30 40,000 2 50,000 Inventory Advance to Subsidiary Company Investment in Subsidiary Company Equipment Accumulated depreciation 130.400 160,000 340.400 3a 1 35,000 35,000 1,000,000 1,000,000 300,000 840,000 450,000 90,000 2 (250,000) 160.000 (100,000) 30,000 (380,000) 2 Land 190.000 100,000 450,000 Other 54,830 54,830 Goodwill 155,555 155,555 Difference between book and implied 1 421,111 2 421,111 Total Assets 1,932,300 935,556 2,173,411 Accounts Payable Notes Payable Bonds Payable 270,500 3b 20,000 250,500 30 40,000 55,556 40,000 2 205,556 150,000 Common Stook Parent Company Subsidiary Company Other Contributed Capital: Parent Company Subsidiary Company Retained Earnings Parent Company Subsidiary Company 400,000 400,000 1 500,000 500,000 1,000,000 1,000,000 261,800 261,800 190,000 190,000 Noncontrolling Interest Total Liabilities and Equity 1 111,111 111,111 111,111 1,932,300 1,657,222 935,556 1,657,222 2,173,411 Palmer Company Trial Balance COST METHOD As of December 31, 2016 Parent General Ledger Stevens Company As of December 31, 2016 Subsidiary General Ledger Stevens Co Palmer Co. Cost of sales 430,000 Cost of sales 240,000 Depreciation expense Depreciation expense 30,000 20,000 35,000 Other expenses 60,000 Other expenses 120,000 35,000 Dividends declared Dividends declared 151,000 Cash 201,200 Cash Accounts receivable 221,000 Accounts receivable 173,000 Inventories 100,400 Inventories 81,000 Investment in Stevens 1,000,000 Equipment 300,000 Accumulated depreciation (140,000) Equipment 450,000 Accumulated depreciation (300,000) Land 290,000 Land 360,000 Total credits 1,185,000 Total credits 2,672,600 Sales 340,000 Sales 620,000 Accounts payable 135,000 Dividend income Accounts payable 31,500 Common stock 500,000 Retained earnings 210,000 323,500 400,000 Bonds payable Total debits 1,185,000 Common stock 1,000,000 Retained earnings 297,600 Total debits 2,672,600 Note: Income statement accounts have not yet been closed out to retained earnings Palmer Company Date of Acquisition -January 1, 2014 Parent General Ledger Stevens Company Balance Sheet Book Value As of January 1, 2014 Cash 1,179,300 Book Value Fair Value Accounts receivable 130,726 187,600 Cash 130,726 200,000 210,000 Note receivable 40,000 Accounts receivable 200,000 Inventory 130,400 Inventories 160,000 300,000 Advance to S 35,000 Equipment 390,000 Equipment Accumulated depreciation 450,000 (250,000) Accumulated depreciat (100,000) (130,000) 190,000 Land 290,000 160,000 Land Other 54,830 54,830 Total 1,932,300 Total assets 935,556 Note payable Accounts payable 270,500 40,000 40,000 400,000 Bonds payable Common stock 205,556 150,000 Other contributed capital 500,000 1,000,000 Common stock Retained earnings Retained earnings 261,800 190,000 Total 1,932,300 Total liabilities and e 935,556 Additional Information Date of Acquisition Your department has noted the following transactions of interest between Palmer and Stevens: a) Stevens Company has not yet recorded the S35,000 cash advance from Palmer Company 2 b) Stevens Company's accounts receivable include $20,000 due from Palmer Company. Stevens Company's $40,000 note payable is payable to Palmer Company. c) 1 1 Additional Information-Date of Acquisition Stevens Company's equipment had an original life of 15 years and a remaining useful life of 10 years. All the inventory was sold in 2014. Stevens Company purchased back its bonds payable on the open market on January 10, 2014, for $150,000 and recognized a gain of $55,556 Subsidiary Company Noncontrolling Parent Eliminations Consolidated Company Dr. Interest Balance 35,000 Cash 179.300 130,726 3a 345.026 Accounts Receivable 187,600 20,000 200,000 30 367,600 Note Receivable 40.000 30 40,000 2 50,000 Inventory Advance to Subsidiary Company Investment in Subsidiary Company Equipment Accumulated depreciation 130.400 160,000 340.400 3a 1 35,000 35,000 1,000,000 1,000,000 300,000 840,000 450,000 90,000 2 (250,000) 160.000 (100,000) 30,000 (380,000) 2 Land 190.000 100,000 450,000 Other 54,830 54,830 Goodwill 155,555 155,555 Difference between book and implied 1 421,111 2 421,111 Total Assets 1,932,300 935,556 2,173,411 Accounts Payable Notes Payable Bonds Payable 270,500 3b 20,000 250,500 30 40,000 55,556 40,000 2 205,556 150,000 Common Stook Parent Company Subsidiary Company Other Contributed Capital: Parent Company Subsidiary Company Retained Earnings Parent Company Subsidiary Company 400,000 400,000 1 500,000 500,000 1,000,000 1,000,000 261,800 261,800 190,000 190,000 Noncontrolling Interest Total Liabilities and Equity 1 111,111 111,111 111,111 1,932,300 1,657,222 935,556 1,657,222 2,173,411 Palmer Company Trial Balance COST METHOD As of December 31, 2016 Parent General Ledger Stevens Company As of December 31, 2016 Subsidiary General Ledger Stevens Co Palmer Co. Cost of sales 430,000 Cost of sales 240,000 Depreciation expense Depreciation expense 30,000 20,000 35,000 Other expenses 60,000 Other expenses 120,000 35,000 Dividends declared Dividends declared 151,000 Cash 201,200 Cash Accounts receivable 221,000 Accounts receivable 173,000 Inventories 100,400 Inventories 81,000 Investment in Stevens 1,000,000 Equipment 300,000 Accumulated depreciation (140,000) Equipment 450,000 Accumulated depreciation (300,000) Land 290,000 Land 360,000 Total credits 1,185,000 Total credits 2,672,600 Sales 340,000 Sales 620,000 Accounts payable 135,000 Dividend income Accounts payable 31,500 Common stock 500,000 Retained earnings 210,000 323,500 400,000 Bonds payable Total debits 1,185,000 Common stock 1,000,000 Retained earnings 297,600 Total debits 2,672,600 Note: Income statement accounts have not yet been closed out to retained earnings