Question
The individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2018, follow. Gibson acquired a 60 percent interest in
The individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2018, follow. Gibson acquired a 60 percent interest in Keller on January 1, 2017, in exchange for various considerations totaling $810,000. At the acquisition date, the fair value of the noncontrolling interest was $540,000 and Kellers book value was $1,080,000. Keller had developed internally a customer list 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.
Gibson sold Keller land with a book value of $85,000 on January 2, 2017, for $180,000. Keller still holds this land at the end of the current year.
Keller regularly transfers inventory to Gibson. In 2017, it shipped inventory costing $208,000 to Gibson at a price of $320,000. During 2018, intra-entity shipments totaled $370,000, although the original cost to Keller 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. Gibson owes Keller $45,000 at the end of 2018.
| Gibson Company | Keller Company | ||||||||||||||||||||||||||||||||||||||||||||||
| Sales | $ | (970,000 | ) | $ | (670,000 | ) | |||||||||||||||||||||||||||||||||||||||||
| Cost of goods sold | 670,000 | 470,000 | |||||||||||||||||||||||||||||||||||||||||||||
| Operating expenses | 160,000 | 40,000 | |||||||||||||||||||||||||||||||||||||||||||||
| Equity in earnings of Keller | (96,000 | ) | 0 | ||||||||||||||||||||||||||||||||||||||||||||
| Net income | $ | (236,000 | ) | $ | (160,000 | ) | |||||||||||||||||||||||||||||||||||||||||
| Retained earnings, 1/1/18 | $ | (1,286,000 | ) | $ | (705,000 | ) | |||||||||||||||||||||||||||||||||||||||||
| Net income (above) | (236,000 | ) | (160,000 | ) | |||||||||||||||||||||||||||||||||||||||||||
| Dividends declared | 110,000 | 55,000 | |||||||||||||||||||||||||||||||||||||||||||||
| Retained earnings, 12/31/18 | $ | (1,412,000 | ) | $ | (810,000 | ) | |||||||||||||||||||||||||||||||||||||||||
| Cash | $ | 186,000 | $ | 80,000 | |||||||||||||||||||||||||||||||||||||||||||
| Accounts receivable | 390,000 | 580,000 | |||||||||||||||||||||||||||||||||||||||||||||
| Inventory | 560,000 | 490,000 | |||||||||||||||||||||||||||||||||||||||||||||
| Investment in Keller | 996,000 | 0 | |||||||||||||||||||||||||||||||||||||||||||||
| Land | 140,000 | 560,000 | |||||||||||||||||||||||||||||||||||||||||||||
| Buildings and equipment (net) | 513,000 | 470,000 | |||||||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 2,785,000 | $ | 2,180,000 | |||||||||||||||||||||||||||||||||||||||||||
| Liabilities | $ | (613,000 | ) | $ | (790,000 | ) | |||||||||||||||||||||||||||||||||||||||||
| Common stock | (760,000 | ) | (490,000 | ) | |||||||||||||||||||||||||||||||||||||||||||
| Additional paid-in capital | 0 | (90,000 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Retained earnings, 12/31/18 | (1,412,000 | ) | (810,000 | ) | |||||||||||||||||||||||||||||||||||||||||||
| Total liabilities and equities Required: Prepare a worksheet to consolidate the separate 2018 financial statements for Gibson and Keller.
| $ | (2,785,000 | ) | $ | (2,180,000 | ) | |||||||||||||||||||||||||||||||||||||||||
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Murder Audit
Authors: Michelle Cornish
1st Edition
1775083624, 978-1775083627
