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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 $1,050,000. At the acquisition date, the fair value of the noncontrolling interest was $700,000 and Keller's book value was $1,400,000. Keller had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $350,000. This intangible asset is being amortized over 20 years Gibson sold Keller land with a book value of $80,000 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 $280,000 to Gibson at a price of $400,000. During 2018, intra-entity shipments totaled $450,000, although the original cost to Keller was only $292,500. 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 $40,000 at the end of 2018 (Note: Parentheses indicate a credit balance.) a. Prepare a worksheet to consolidate the separate 2018 financial statements for Gibson and Keller. b. How would the consolidation entries in requirement (a) have differed if Gibson had sold a building with a $185,000 book value (cost of $390,000) to Keller for $350,000 instead of land, as the problem reports? Assume that the building had a 10-year remaining life at the date of transfer. GIBSON AND KELLER Consolidation Worksheet For the Year Ending December 31, 2018 Consolidation Entries Noncontrolling Consolidated Interest Accounts Gibson Keller Debit Credit Totals $ (1,050,000) Sales $ (750,000) Cost of goods sold 750,000 550,000 Operating expenses 80,000 130,000 Equity in earnings of Keller (72,000) 0 $ (242,000) $ (120,000) Separate company net income Consolidated net income To noncontrolling interest To Gibson Company Retained earnings, 1/1-Gibson $ (1,366,000) Retained earnings, 1/1-Keller (745,000) Net income (242,000) (120,000) 150,000 Dividends declared 50,000 $(1,458,000) S (815,000) Retained earnings, 12/31 194,000 $ Cash $ 80,000 406,000 Accounts receivable 660,000 570,000 Inventory 640,000 Investment in Keller 1,119,000 Land 640,000 220,000 Buildings and equipment (net) 521,000 550,000 Customer list 3,100,000 $ $ 2,500,000 Total assets Liabilities $ $ (802,000) (985,000) Common stock (610,000) (840,000) Additional paid-in capital |(90,000) Retained earnings, 12/31 (1,458,000) (815,000) NCI in Keller, 1/1 NCI in Keller, 12/31 (2,500,000) Total liabilities and equity (3,100,000) Consolidation Worksheet Entries 2 Prepare Entry *TA to defer the intra-entity gain as of the beginning of the year. Note: Enter debits before credits. Transaction Accounts Debit Credit 1 Clear entry Record entry view consolidation entries Consolidation Worksheet Entries 1 2 Prepare Entry ED to remove the excess depreciation for the current year created by the transfer price Note: Enter debits before credits. Transaction Accounts Debit Credit 2 Record entry Clear entry view consolidation entries
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