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P 5-35 Comprehensive Problem: Differential Apportionment Mortar Corporation acquired 80 percent of Granite Company on January 1, 20x7, for $173,000, At that date, the fair value of the non-controlling interest was $43,250. The trial balances for the two companies on December 31, 20x7, included the following amounts: Mortar Corporation Granite Company Item Debit Credit Debit Credit Cash $38,000 $25,000 Accounts Receivable 50,000 55,000 Inventory 240,000 100,000 Land 80,000 20,000 Buildings & Equipment 500,000 150,000 Investment in Granite Company Stock 202,000 Cost of Goods Sold 500,000 250,000 Depreciation Expense 25,000 15,000 Other Expenses 75,000 75,000 Dividends Declared 50,000 20,000 Accumulated Depreciation $155,000 $75,000 Accounts Payable 70,000 35,000 Mortgages Payable 200,000 50,000 Common Stock 300,000 50,000 Retained Earnings 290,000 100,000 Sales 700,000 400,000 Income from Subsidiary 45,000 $1,760,000 $1,760,000 $710,000 $710,000 Additional Information 1. On January 1, 20x7, Granite reported net assets with a book value of $150,000 and a fair value of $191,250 2. Granite's depreciable assets has an estimated economic life of 11 years on the date of combination. The difference between fair value and book value of Granite's net assets is related entirely to buildings and equipment 3. Mortar used the equity method in accounting for its investment in Granite. 4. Detailed analysis of receivables and payables showed that Granite owed Mortar $16,000 on December 31, 20x7. Required: a. Give all journal entries recorded by Mortar with regard to its investment in Granite during 20x7. b. Give all elimination entries needed to prepare a full set of consolidated financial statements for 20x7. c. Prepare a three-part consolidation worksheet as of December 31, 20x7. 100% Time 20X7 Equity Method Entries: a Eliminating entries: -1 Investment in Sub Income from Sub NCI TT Common Stock Retained Earnings Income to NCI Mortar Corp. Granite Co. DR CR Consolidated Income Statement Sales COGS Depreciation Expense Other Expenses Income from Sub Consolidated Net Income Income to NCI Controlling Interest in Net Income 700,000 (500,000) (25,000) (75,000) 45,000 145,000 400,000 (250,000) (15,000) (75,000) 60,000 145,000 60,000 290,000 100,000 Retained Earnings Beginning Balance Net Income Less: Dividends Declared Ending Balance (50,000) (20,000) Balance Sheet Cash TAR Inventory Land Buildings & Equipment Less: Accumulated Depreciation Investment in Sub Differential Goodwill Total Assets 38,000 50,000 240,000 80,000 500,000 (155,000) 202,000 25,000 55,000 100,000 20,000 150,000 (75,000) 70,000 200,000 300,000 35,000 50,000 50,000 Accounts Payable Mortgage Payable Common Stock Retained Earnings NCI in NA Total Liabilities & Equity
