Problem 7-25 (LO 7-2)

House Corporation has been operating profitably since its creation in 1960. At the beginning of 2012, House acquired a 70 percent ownership in Wilson Company. At the acquisition date, House prepared the following fair-value allocation schedule:

Consideration transferred for 70 percent interest in Wilson				$	808,500
Fair value of the 30% noncontrolling interest					346,500
Wilson business fair value				$	1,155,000
Wilson book value					820,000
Excess fair value over book value				$	335,000
Assignments to adjust Wilsons assets to fair value:
To buildings (20-year life)	$	63,000
To equipment (4-year life)		(22,800	)
To franchises (10-year life)		78,000			118,200
To goodwill (indefinite life)				$	216,800

House regularly buys inventory from Wilson at a markup of 25 percent more than cost. Houses purchases during 2012 and 2013 and related ending inventory balances follow:

Year	Intra-Entity Purchases		Retained Intra-Entity InventoryEnd of Year (at transfer price)
2012	$	127,500		$	42,500
2013		156,250			62,500

On January 1, 2014, House and Wilson acted together as co-acquirers of 80 percent of Cuddy Companys outstanding common stock. The total price of these shares was $288,000, indicating neither goodwill nor other specific fair-value allocations. Each company put up one-half of the consideration transferred. During 2014, House acquired additional inventory from Wilson at a price of $232,000. Of this merchandise, 45 percent is still held at year-end.

	House Corporation			Wilson Company			Cuddy Company
Sales and other revenues	$	(1,002,972	)	$	(808,740	)	$	(361,000	)
Cost of goods sold		603,000			363,000			199,000
Operating expenses		220,000			312,500			90,100
Income of Wilson Company		(93,268	)		0			0
Income of Cuddy Company		(28,760	)		(28,760	)		0
Net income	$	(302,000	)	$	(162,000	)	$	(71,900	)
Retained earnings, 1/1/14	$	(877,000	)	$	(664,000	)	$	(210,000	)
Net income (above)		(302,000	)		(162,000	)		(71,900	)
Dividends paid		100,000			96,000			50,000
Retained earnings, 12/31/14	$	(1,079,000	)	$	(730,000	)	$	(231,900	)
Cash and receivables	$	57,272		$	250,240		$	89,750
Inventory		404,600			367,000			53,050
Investment in Wilson Company		942,368			0			0
Investment in Cuddy Company		152,760			152,760			0
Buildings		434,000			389,000			243,000
Equipment		378,000			144,000			94,100
Land		256,000			395,000			18,000
Total assets	$	2,625,000		$	1,698,000		$	497,900
Liabilities	$	(726,000	)	$	(658,000	)	$	(116,000	)
Common stock		(820,000	)		(310,000	)		(150,000	)
Retained earnings, 12/31/14		(1,079,000	)		(730,000	)		(231,900	)
Total liabilities and equities	$	(2,625,000	)	$	(1,698,000	)	$	(497,900	)

Note: Parentheses indicate a credit balance.

Using the three companies' financial records for 2014 above, prepare a consolidation worksheet. The partial equity method based on operating income has been applied to each investment. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)