Question
On July 1, 2018, Truman Company acquired a 70 percent interest in Atlanta Company in exchange for consideration of $753,900 in cash and equity securities.
On July 1, 2018, Truman Company acquired a 70 percent interest in Atlanta Company in exchange for consideration of $753,900 in cash and equity securities. The remaining 30 percent of Atlantas shares traded closely near an average price that totaled $323,100 both before and after Trumans acquisition.
In reviewing its acquisition, Truman assigned a $109,000 fair value to a patent recently developed by Atlanta, even though it was not recorded within the financial records of the subsidiary. This patent is anticipated to have a remaining life of five years.
The following financial information is available for these two companies for 2018. In addition, the subsidiarys income was earned uniformly throughout the year. The subsidiary declared dividends quarterly.
Truman | Atlanta | ||||||
Revenues | $ | (716,080 | ) | $ | (498,000 | ) | |
Operating expenses | 427,000 | 345,000 | |||||
Income of subsidiary | (45,920 | ) | 0 | ||||
Net income | $ | (335,000 | ) | $ | (153,000 | ) | |
Retained earnings, 1/1/18 | $ | (905,000 | ) | $ | (508,000 | ) | |
Net income (above) | (335,000 | ) | (153,000 | ) | |||
Dividends declared | 175,000 | 60,000 | |||||
Retained earnings, 12/31/18 | $ | (1,065,000 | ) | $ | (601,000 | ) | |
Current assets | $ | 593,180 | $ | 414,000 | |||
Investment in Atlanta | 778,820 | 0 | |||||
Land | 389,000 | 219,000 | |||||
Buildings | 707,000 | 676,000 | |||||
Total assets | $ | 2,468,000 | $ | 1,309,000 | |||
Liabilities | $ | (903,000 | ) | $ | (388,000 | ) | |
Common stock | (95,000 | ) | (300,000 | ) | |||
Additional paid-in capital | (405,000 | ) | (20,000 | ) | |||
Retained earnings, 12/31/18 | (1,065,000 | ) | (601,000 | ) | |||
Total liabilities and stockholders' equity | $ | (2,468,000 | ) | $ | (1,309,000 | ) | |
D.Prepare a worksheet to consolidate the financial statements of these two companies as of December 31, 2018. At year-end, there were no intra-entity receivables or payables.
TRUMAN COMPANY AND SUBSIDIARY ATLANTA COMPANY Consolidation Worksheet For Year Ending December 31, 2018 Truman Atlanta Consolidation Entries Company Company Debit Credit $ (716,080) $ (498,000) $ 249,000 427,000 345,000 10,900 172,500 (45,920) 45,920 $ (335,000) $ (153,000) Noncontrolling Interest Consolidated Totals Revenues Operating expenses Net income of subsidiary Separate company net income Consolidated net income Net income attributable to NCI Net income attributable to Truman $ 0 $ 0 508,000 Retained earnings, 1/1 Net income Dividends declared Retained earnings 12/31 $ (905,000) (335,000) 175,000 $(1,065,000) $ (508,000) (153,000) 60,000 $ (601,000) 42,000 $ 0 $ 414,000 Current assets Investment in Atlanta Land $ 593,180 778,820 389,000 21,000 219,000 Land 219,000 389,000 707,000 676,000 10,900 109,000 93,500 $ 2,468,000 $ 0 Buildings Patent Goodwill Total assets Liabilities Common stock Additional paid in capital Retained earnings 12/31 Noncontrolling interest 7/1 Noncontrolling interest 12/31 Total liabilities and equity $ 1,309,000 $ (388,000) (300,000) (20,000) (601,000) $ (903,000) (95,000) (405,000) (1,065,000) 300.000 20,000 32,700 X 28,050 X 271,350 X 557,500 0 $(2,468,000) $(1,309,000) $ 1,357,320 $ $ 0Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started