On January 1, 2018, Sledge had common stock of $250,000 and retained earnings of $390,000 During that year, Sledge reported sales of $260,000, cost of goods sold of $135,000, and operating expenses of $53,000 On January 1, 2016, Percy, Inc , acquired 80 percent of Sledge's outstanding voting stock At that date, $73,000 of the acquisition date fair value was assigned to unrecorded contracts (with a 20 year life) and $33,000 to an undervalued building (with a 10 year remaining life) In 2017, Sledge sold inventory costing $16,800 to Percy for $28,000 Of this merchandise, Percy continued to hold $7,000 at year end During 2018, Sledge transferred inventory costing $18,150 to Percy for $33,000 Percy still held half of these items at year end On January 1, 2017, Percy sold equipment to Sledge for $18,500 This asset originally cost $29,000 but had a January 1, 2017, book value of $11,600 At the time of transfer, the equipment's remaining life was estimated to be five years Percy has properly applied the equity method to the investment in Sledge A Prepare worksheet entries to consolidate these two companies as of December 31, 2018 B Compute the net income attributable to the noncontrolling interest for 2018 A Prepare Entry G to remove the intra entity gross profit from the beginning account balances Note Enter debits before credits Transaction Accounts Debit Credit 1 Prepare Entry TA to adjust the equipment balance to the original cost and to adjust the accumulated depreciation to the consolidated January 1, 2018 balance Note Enter debits before credits Transaction Accounts Debit Credit 2 Prepare Entry S to eliminate the subsidiary's stockholders' equity accounts and to recognize the noncontrolling interest balance as of January 1, 2018 Note Enter debits before credits Transaction Accounts Debit Credit 3 Prepare Entry A to recognize acquisition date fair value allocations adjusted for 2 years of amortization Note Enter debits before credits Transaction Accounts Debit Credit 4 Prepare Entry I to remove the parent's equity method income Note Enter debits before credits Transaction Accounts Debit Credit 5 Prepare Entry E to recognize 2018 excess amortization Note Enter debits before credits Transaction Accounts Debit Credit 6 Prepare Entry TI to eliminate the intra entity inventory tranfers during 2018 Note Enter debits before credits Transaction Accounts Debit Credit 7 Prepare Entry G to remove the intra entity gross profit from the ending account balances Note Enter debits before credits Transaction Accounts Debit Credit 8 Prepare Entry ED to eliminate the excess depreciation on equipment recorded at transfer price Note Enter debits before credits Transaction Accounts Debit Credit 9

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 29, 2024

On January 1, 2018, Sledge had common stock of $250,000 and retained earnings of $390,000. During that year, Sledge reported sales of $260,000, cost of

On January 1, 2018, Sledge had common stock of $250,000 and retained earnings of $390,000. During that year, Sledge reported sales of $260,000, cost of goods sold of $135,000, and operating expenses of $53,000.

On January 1, 2016, Percy, Inc., acquired 80 percent of Sledge's outstanding voting stock. At that date, $73,000 of the acquisition-date fair value was assigned to unrecorded contracts (with a 20-year life) and $33,000 to an undervalued building (with a 10-year remaining life).

In 2017, Sledge sold inventory costing $16,800 to Percy for $28,000. Of this merchandise, Percy continued to hold $7,000 at year-end. During 2018, Sledge transferred inventory costing $18,150 to Percy for $33,000. Percy still held half of these items at year-end.

On January 1, 2017, Percy sold equipment to Sledge for $18,500. This asset originally cost $29,000 but had a January 1, 2017, book value of $11,600. At the time of transfer, the equipment's remaining life was estimated to be five years.

Percy has properly applied the equity method to the investment in Sledge.

A.Prepare worksheet entries to consolidate these two companies as of December 31, 2018.

B. Compute the net income attributable to the noncontrolling interest for 2018.

Prepare Entry *G to remove the intra-entity gross profit from the beginning account balances.

Note: Enter debits before credits.

Transaction	Accounts	Debit	Credit
1

Prepare Entry *TA to adjust the equipment balance to the original cost and to adjust the accumulated depreciation to the consolidated January 1, 2018 balance.

Note: Enter debits before credits.

Transaction	Accounts	Debit	Credit
2

Prepare Entry S to eliminate the subsidiary's stockholders' equity accounts and to recognize the noncontrolling interest balance as of January 1, 2018.

Note: Enter debits before credits.