Problem 3 Hoyle, Schaefer and Doupnik - Chapter 5 Problem 36 I use Equity method instead of Partial Equity method The individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2021, follow. Gibson acquired a 60% interest in Keller on January 1, 2020, in exchange for various considerations totaling $570,000. At the acquisition date, the fair value of the non-controlling interest was 380,000 and Keller's book value was $850,000. Keller had developed internally a customer list that was not recorded on its books but had an acquisition- date fair value of $100,000. This intangible asset is being amortized over 20 years. Gibson sold Keller land with a book value of $60,000 on January 2, 2020, for $100,000. Keller still holds this land at the end of the current year. Keller reported Net Income $200,000 and Dividends for $20,000 in 2020. Keller regularly transfer inventory to Gibson. In 2020, it shipped inventory costing $100,000 to Gibson at a price of $150,000. During 2021, intra-entity shipments totaled $200,000, although the original cost to Keller was only $140,000. In each of these years, 20% of the merchandise was not resold to outside parties until the period following the transfer. Gibson owes Keller $40,000 at the end of 2021. 1. What is the goodwill at the acquisition date? 2. What is the ECOBV amortization? 3. Determine the unrealized gain on the sale of land from Gibson to Keller in 2020? Revenues Gibon (800,000) Keller (500,000) Cost of Goods Sold 500,000 300,000 Operating Expenses 100,000 60,000 Income of Keller Company (79,800) Net Income (279,800) (140,000) Retained Earnings, 1/1/21 (1,067,000) (620,000) Net Income (279,800) (140,000) Dividend Paid 115,000 60,000 Retained Earnings, 12/31/21 (1,231,800) (700,000) Cash and receivables 177,000 90,000 Account Receivables 356,000 410,000 Inventory 440,000 320,000 Investment in Keller 672,800 0 Land 180,000 390,000 Building & Equipment (net) 496,000 300,000 Total Assets 2,321,800 1,510,000 Liabilities (480,000) (400,000) Common Stock Additional Paid-in Capital Retained Earnings 12/31/21 Total Liabilities and Equity (1,231,800) (2,321,800) (1,510,000) (610,000) (320,000) (90,000) (700,000) 6. Prepare the consolidation journal entries 7. Complete the consolidation Worksheet and then answer the following questions: a. What is the total consolidated revenue? b. What is the total consolidated cost of goods sold? c. What is the consolidated total for equipment (net) at December 31? d. What is the consolidated total for inventory at December 317 e. What is the consolidated total for Land at December 31? 4. Determine the unrealized profits on the transfer of inventory from Keller to Gibson in 2020 and 2021? 5. What is the consolidated total of noncontrolling interest appearing on the balance sheet? Consolidation Accounts Gib Keller Nanstrolling Calidated T Debit Credit Reven Cest of Goods Sold Opening Expenses lecome of Keller Company (800,000) (500,000) 500,000 300,000 100.000 60,000 (79,800) Separated company net incom (279,800) (140,000) Consolidated Net Income Noncontrolling Interest in Sub's Income Net Income to Controlling Interest Retained Earnings, 1/1/21 Gabon (1,067,000) Keller (620,000) Dividend Pid (279,800) 115.000 Retained Earnings, 1201/21 (1.231,800) (140,000) 60,000 (700,000) Cash and receivables 177,000 90,000 Account Real 356,000 410,000 Inventory 440,000 320,000 Investment in Keller 672,800 Land 180,000 390,000 Building & Equipment (n) 496,000 300,000 Total Assets 2,321,800 1510,000 Liabilities Com (480,000) (400,000) Stock Additional Paid in (610,000) (320,000) o (90,000) Non-controlling Interest in Sub 1/1 Non-conteelling Interest in Sub 12/31 Retained Earnings 123121 (1,231,800) Total Liabilities and Equities (2,321,800) (700,000) (1,510,000)