Question
The individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2015, follow. Gibson acquired a 60 percent interest in
The individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2015, follow. Gibson acquired a 60 percent interest in Keller on January 1, 2014, in exchange for various considerations totaling $390,000. At the acquisition date, the fair value of the noncontrolling interest was $260,000 and Kellers book value was $510,000. Keller had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $140,000. This intangible asset is being amortized over 20 years. |
Gibson sold Keller land with a book value of $65,000 on January 2, 2014, for $130,000. Keller still holds this land at the end of the current year. |
Keller regularly transfers inventory to Gibson. In 2014, it shipped inventory costing $133,000 to Gibson at a price of $190,000. During 2015, intra-entity shipments totaled $240,000, although the original cost to Keller was only $156,000. 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 $60,000 at the end of 2015. |
Gibson Company | Keller Company | |||||
Sales | $ | (840,000 | ) | $ | (540,000 | ) |
Cost of goods sold | 540,000 | 340,000 | ||||
Operating expenses | 140,000 | 45,000 | ||||
Equity in earnings of Keller Company | (93,000 | ) | 0 | |||
Net income | $ | (253,000 | ) | $ | (155,000 | ) |
Retained earnings, 1/1/15 | $ | (1,156,000 | ) | $ | (640,000 | ) |
Net income (above) | (253,000 | ) | (155,000 | ) | ||
Dividends declared | 135,000 | 45,000 | ||||
Retained earnings, 12/31/15 | $ | (1,274,000 | ) | $ | (750,000 | ) |
Cash | $ | 173,000 | $ | 100,000 | ||
Accounts receivable | 364,000 | 450,000 | ||||
Inventory | 430,000 | 360,000 | ||||
Investment in Keller Company | 798,000 | 0 | ||||
Land | 150,000 | 430,000 | ||||
Buildings and equipment (net) | 500,000 | 340,000 | ||||
Total assets | $ | 2,415,000 | $ | 1,680,000 | ||
Liabilities | $ | (511,000 | ) | $ | (490,000 | ) |
Common stock | (630,000 | ) | (360,000 | ) | ||
Additional paid-in capital | 0 | (80,000 | ) | |||
Retained earnings, 12/31/15 | (1,274,000 | ) | (750,000 | ) | ||
Total liabilities and equities | $ | (2,415,000 | ) | $ | (1,680,000 | ) |
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