Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
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 Beflstar on January 1,2023, in exchange for vartous considerations totaling $810,000. At the acquisition date, the fair value of the noncontrolling interest was $540,000 and Bellstar's book value was $1,080,000. Bellstar had developed internally a trademark that was not recorded on its books but had an acquisition-date fair value of $270,000. 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 $85,000 on January 2,2023, for $180,000. Bellstar still holds this land at the end of the current year. Bellstar regularly trasfers inventory to Abbey. In 2023 , it shipped inventory costing $208.000 to Abbey at a price of $320,000. During 2024 , intra entity shipments totaled $370,000, although the original cost to Bellstar was only $222,000. 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 $45,000 at the end of 2024 . percent of the merchandise was not resold to outside parties until the period following the transfer. Abbey owes Bellstar $45,000 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 bullding on January 2, 2023, with a \begin{tabular}{|c|c|c|c|c|c|c|c|} \hline \multicolumn{8}{|c|}{ ABEEY ANO BELLSTAR } \\ \hline \multicolumn{8}{|c|}{ Consolidation Worksheet } \\ \hline \multicolumn{8}{|c|}{ For the Year Ending December 31, 2024} \\ \hline \multirow[b]{2}{*}{ Accounts } & \multirow{2}{*}{\multicolumn{2}{|c|}{ Abbey }} & \multirow[b]{2}{*}{ Belistar } & \multicolumn{2}{|c|}{ Consolidation Entries } & \multirow[b]{2}{*}{\begin{tabular}{l} Noncontrolling \\ Interest \end{tabular}} & \multirow[b]{2}{*}{\begin{tabular}{c} Consolidated \\ Totals \end{tabular}} \\ \hline & & & & Debit & Credit & & \\ \hline Sales & 3 & (970,000) & $(670,000)} & & & & \\ \hline Cost of goods sold & & 670,000 & 470,000 & & & & \\ \hline Opotating expenses & & 160,000 & 40,000 & & & & \\ \hline Equity in earnings of Bollstar & & (96,000) & of & & & & \\ \hline Separate compary net income & 5 & (236,000) & 5(160,000) & & & + & \\ \hline \multicolumn{8}{|l|}{ Consolidated net income } \\ \hline \multicolumn{8}{|l|}{ To noncontrolling interest } \\ \hline To Abbey Company & & + & & & & & \\ \hline Retained eamings, Abbey, 1/1 & s & (1,200,000) & & & & & \\ \hline Retained eamings, Boilstar, it & & & (705,000) & & & & \\ \hline Net income & & (235,000) & (160,000) & & & & \\ \hline Dividends declared & & 110,000 & 55,000 & & & & \\ \hline Rotained eamings, 12/31 & 5 & (1,412,000) & \$ (810,000) & & & & \\ \hline Cast: & 5 & 186000 & 80,000 & & & & \\ \hline Accounts recoivatio & 3 & 390,000 & 580,000 & & & & \\ \hline Invontory & & 560,000 & 490,000 & & & & \\ \hline Invosfment in Bodistar & & 990,000 & & & & & \\ \hline \end{tabular} Consolidation Worksheet Entries Prepare Entry *TA to defer the intra-entity gain as of the beginning of the year. Note: Enter debits before credits. 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 Beflstar on January 1,2023, in exchange for vartous considerations totaling $810,000. At the acquisition date, the fair value of the noncontrolling interest was $540,000 and Bellstar's book value was $1,080,000. Bellstar had developed internally a trademark that was not recorded on its books but had an acquisition-date fair value of $270,000. 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 $85,000 on January 2,2023, for $180,000. Bellstar still holds this land at the end of the current year. Bellstar regularly trasfers inventory to Abbey. In 2023 , it shipped inventory costing $208.000 to Abbey at a price of $320,000. During 2024 , intra entity shipments totaled $370,000, although the original cost to Bellstar was only $222,000. 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 $45,000 at the end of 2024 . percent of the merchandise was not resold to outside parties until the period following the transfer. Abbey owes Bellstar $45,000 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 bullding on January 2, 2023, with a \begin{tabular}{|c|c|c|c|c|c|c|c|} \hline \multicolumn{8}{|c|}{ ABEEY ANO BELLSTAR } \\ \hline \multicolumn{8}{|c|}{ Consolidation Worksheet } \\ \hline \multicolumn{8}{|c|}{ For the Year Ending December 31, 2024} \\ \hline \multirow[b]{2}{*}{ Accounts } & \multirow{2}{*}{\multicolumn{2}{|c|}{ Abbey }} & \multirow[b]{2}{*}{ Belistar } & \multicolumn{2}{|c|}{ Consolidation Entries } & \multirow[b]{2}{*}{\begin{tabular}{l} Noncontrolling \\ Interest \end{tabular}} & \multirow[b]{2}{*}{\begin{tabular}{c} Consolidated \\ Totals \end{tabular}} \\ \hline & & & & Debit & Credit & & \\ \hline Sales & 3 & (970,000) & $(670,000)} & & & & \\ \hline Cost of goods sold & & 670,000 & 470,000 & & & & \\ \hline Opotating expenses & & 160,000 & 40,000 & & & & \\ \hline Equity in earnings of Bollstar & & (96,000) & of & & & & \\ \hline Separate compary net income & 5 & (236,000) & 5(160,000) & & & + & \\ \hline \multicolumn{8}{|l|}{ Consolidated net income } \\ \hline \multicolumn{8}{|l|}{ To noncontrolling interest } \\ \hline To Abbey Company & & + & & & & & \\ \hline Retained eamings, Abbey, 1/1 & s & (1,200,000) & & & & & \\ \hline Retained eamings, Boilstar, it & & & (705,000) & & & & \\ \hline Net income & & (235,000) & (160,000) & & & & \\ \hline Dividends declared & & 110,000 & 55,000 & & & & \\ \hline Rotained eamings, 12/31 & 5 & (1,412,000) & \$ (810,000) & & & & \\ \hline Cast: & 5 & 186000 & 80,000 & & & & \\ \hline Accounts recoivatio & 3 & 390,000 & 580,000 & & & & \\ \hline Invontory & & 560,000 & 490,000 & & & & \\ \hline Invosfment in Bodistar & & 990,000 & & & & & \\ \hline \end{tabular} Consolidation Worksheet Entries Prepare Entry *TA to defer the intra-entity gain as of the beginning of the year. Note: Enter debits before credits

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Advanced Financial Accounting

Authors: Richard E. Baker, Valdean C. Lembke, Thomas E. King

3rd Edition

0070054142, 978-0070054141

More Books

Students also viewed these Accounting questions

Question

1. Critically discuss treatment approaches for violent offenders.

Answered: 1 week ago