Question
Price Corporation acquired 90% of the outstanding shares of Smelter Corp. on 1/1/2019 for $3,150,000 in cash. At 1/1/2019, Smelter reported total shareholders equity of
Price Corporation acquired 90% of the outstanding shares of Smelter Corp. on 1/1/2019 for $3,150,000 in cash. At 1/1/2019, Smelter reported total shareholders equity of $2,700,000 ($200,000 of contributed capital). Of this price, $140,000 was attributed to equipment with a 10-year remaining useful life. Of this price, $160,000 was attributed to a customer list with a 10-year remaining useful life. Of this price, the remainder was attributed to goodwill. On January 1, 2021, Price purchased equipment from Smelter for $50,000. The equipment was purchased by Smelter on 1/1/16 for $60,000 (15 year useful life). Price assigned a 10-year remaining useful life to the equipment bought from Smelter. On January 1, 2021, Smelter sold land that cost Smelter $20,000 to Price for $25,000. Assume that no additional shares of common stock have been issued by Smelter since 1/1/19. Prepare the consolidation worksheet.
The following financial figures were for the two companies for the year ended December 31, 2022:
| Price Corp. | Smelter Corp. | |
| Revenues | (14,000,000) | (4,000,000) |
| Cost of goods sold | 6,500,000 | 1,500,000 |
| Selling general and administrative expenses | 1,800,000 | 800,000 |
| Depreciation and amortization expense | 400,000 | 200,000 |
| Interest expense bonds | 100,000 | |
| Interest income - bond investment | (10,000) | |
| Dividend revenue | (90,000) | |
| Net income | (5,290,000) | (1,510,000) |
| Retained earnings, January 1 | (15,000,000) | |
| Retained earnings, January 1 | (3,400,000) | |
| Net income | (5,290,000) | (1,510,000) |
| Dividends paid | 1,000,000 | 100,000 |
| Retained earnings, December 31 | (19,290,000) | (4,810,000) |
| Cash and receivables | 1,600,000 | 150,000 |
| Inventory | 8,000,000 | 240,000 |
| Investment in Smelter Corp. | 3,150,000 | 0 |
| Investment in bonds | 0 | 130,000 |
| Land | 1,400,000 | 240,000 |
| Buildings and equipment | 12,000,000 | 6,000,000 |
| Accum. depreciation - buildings and equipment | (3,860,000) | (1,500,000) |
| Total assets | 22,290,000 | 5,260,000 |
| Accounts payable | (580,000) | (50,000) |
| Bonds payable | (2,000,000) | (200,000) |
| Common stock | (100,000) | (100,000) |
| Additional paid-in capital | (320,000) | (100,000) |
| Retained earnings | (19,290,000) | (4,810,000) |
| Total liabilities and stockholders' equity | (22,290,000) | (5,260,000) |
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Financial And Managerial Accounting For Decision Makers
Authors: Michelle Hanlon, Robert Magee, Glenn Pfeiffer, Thomas Dyckman
4th Edition
1618533614, 9781618533616
