The individual financial statements for Abbey Company and Bellstar Company for the year ending December 31, 2024, follow. Abbey acquired a 60 percent interest in Bellstar on January 1, 2023, in exchange for various considerations totaling $750,000. At the acquisition date, the fair value of the noncontrolling interest was $500,000 and Bellstars book value was $1,000,000. Bellstar had developed internally a trademark that was not recorded on its books but had an acquisition-date fair value of $250,000. This intangible asset is being amortized over 20 years. Abbey uses the partial equity method to account for its investment in Bellstar.
Abbey sold Bellstar land with a book value of $75,000 on January 2, 2023, for $160,000. Bellstar still holds this land at the end of the current year.
Bellstar regularly transfers inventory to Abbey. In 2023, it shipped inventory costing $180,000 to Abbey at a price of $300,000. During 2024, intra-entity shipments totaled $350,000, although the original cost to Bellstar was only $245,000. In each of these years, 20 percent of the merchandise was not resold to outside parties until the period following the transfer. Abbey owes Bellstar $35,000 at the end of 2024.
Note: Parentheses indicate a credit balance. Required: a. Prepare a worksheet to consolidate the separate 2024 financial statements for Abbey and Bellstar. b. How would the consolidation entries in requirement (a) have differed if Abbey had sold a building on January 2, 2023, with a $135,000 book value (cost of $290,000 ) to Bellstar for $250,000 instead of land, as the problem reports? Assume that the building had a 10-year remaining life at the date of transfer. Consolidation Worksheet Entries Prepare Entry *TA to defer the intra-entity gain as of the beginning of the year. Note: Enter debits before credits. \begin{tabular}{|c|c|c|c|c|c|c|c|c|} \hline \multicolumn{9}{|c|}{ rur tIe rear clluilly veceminer 01, & \\ \hline Separate company net income & $ & (262,000) & $ & (170,000) & & & & \\ \hline \multicolumn{9}{|l|}{ Consolidated net income } \\ \hline \multicolumn{9}{|l|}{ To noncontrolling interest } \\ \hline \multicolumn{9}{|l|}{ To Abbey Company } \\ \hline Retained earnings, Abbey, 1/1 & $ & (1,266,000) & & & & & & \\ \hline Retained earnings, Bellstar, 1/1 & & & & (695,000) & & & P & \\ \hline Net income & & (262,000) & & (170,000) & & & & \\ \hline Dividends declared & & 145,000 & & 45,000 & & & ? & \\ \hline Retained earnings, 12/31 & $ & (1,383,000) & $ & (820,000) & & & & \\ \hline Cash & $ & 184,000 & $ & 60,000 & & & ? & \\ \hline Accounts receivable & & 386,000 & & 560,000 & & & & \\ \hline Inventory & & 540,000 & & 470,000 & & & 7 & \\ \hline Investment in Bellstar & & 966,000 & & & & & & \\ \hline Land & & 120,000 & & 540,000 & & & & \\ \hline Buildings and equipment (net) & & 511,000 & & 450,000 & & & r & \\ \hline \multicolumn{9}{|l|}{ Trademark } \\ \hline Total assets & $ & 2,707,000 & $ & 2,080,000 & & & & \\ \hline Liabilities & $ & (584,000) & $ & (720,000) & & & 3 & \\ \hline Common stock & & (740,000) & & (470,000) & & & & \\ \hline Additional paid-in capital & & & & (70,000) & & & & \\ \hline Retained earnings, 12/31 & & (1,383,000) & & (820,000) & & & P & \\ \hline \multicolumn{9}{|l|}{ Noncontrolling interest 1/1} \\ \hline \multicolumn{9}{|l|}{ Noncontrolling interest 12/31 } \\ \hline Total liabilities and equity & $ & (2,707,000) & $ & (2,080,000) & & & & \\ \hline \end{tabular} Consolidation Worksheet Entries Prepare Entry ED to remove the excess depreciation for the current year created by the transfer price. Note: Enter debits before credits. Note: Parentheses indicate a credit balance. Required: a. Prepare a worksheet to consolidate the separate 2024 financial statements for Abbey and Bellstar. b. How would the consolidation entries in requirement (a) have differed if Abbey had sold a building on January 2, 2023, with a $135,000 book value (cost of $290,000 ) to Bellstar for $250,000 instead of land, as the problem reports? Assume that the building had a 10-year remaining life at the date of transfer. Consolidation Worksheet Entries Prepare Entry *TA to defer the intra-entity gain as of the beginning of the year. Note: Enter debits before credits. \begin{tabular}{|c|c|c|c|c|c|c|c|c|} \hline \multicolumn{9}{|c|}{ rur tIe rear clluilly veceminer 01, & \\ \hline Separate company net income & $ & (262,000) & $ & (170,000) & & & & \\ \hline \multicolumn{9}{|l|}{ Consolidated net income } \\ \hline \multicolumn{9}{|l|}{ To noncontrolling interest } \\ \hline \multicolumn{9}{|l|}{ To Abbey Company } \\ \hline Retained earnings, Abbey, 1/1 & $ & (1,266,000) & & & & & & \\ \hline Retained earnings, Bellstar, 1/1 & & & & (695,000) & & & P & \\ \hline Net income & & (262,000) & & (170,000) & & & & \\ \hline Dividends declared & & 145,000 & & 45,000 & & & ? & \\ \hline Retained earnings, 12/31 & $ & (1,383,000) & $ & (820,000) & & & & \\ \hline Cash & $ & 184,000 & $ & 60,000 & & & ? & \\ \hline Accounts receivable & & 386,000 & & 560,000 & & & & \\ \hline Inventory & & 540,000 & & 470,000 & & & 7 & \\ \hline Investment in Bellstar & & 966,000 & & & & & & \\ \hline Land & & 120,000 & & 540,000 & & & & \\ \hline Buildings and equipment (net) & & 511,000 & & 450,000 & & & r & \\ \hline \multicolumn{9}{|l|}{ Trademark } \\ \hline Total assets & $ & 2,707,000 & $ & 2,080,000 & & & & \\ \hline Liabilities & $ & (584,000) & $ & (720,000) & & & 3 & \\ \hline Common stock & & (740,000) & & (470,000) & & & & \\ \hline Additional paid-in capital & & & & (70,000) & & & & \\ \hline Retained earnings, 12/31 & & (1,383,000) & & (820,000) & & & P & \\ \hline \multicolumn{9}{|l|}{ Noncontrolling interest 1/1} \\ \hline \multicolumn{9}{|l|}{ Noncontrolling interest 12/31 } \\ \hline Total liabilities and equity & $ & (2,707,000) & $ & (2,080,000) & & & & \\ \hline \end{tabular} Consolidation Worksheet Entries Prepare Entry ED to remove the excess depreciation for the current year created by the transfer price. Note: Enter debits before credits
