The individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2021, follow. Gibson acquired a 60 percent interest in Keller on January 1, 2020, in exchange for various considerations totaling $420,000. At the acquisition date, the fair value of the noncontrolling interest was $280,000 and Kellers book value was $550,000. Keller had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $150,000. This intangible asset is being amortized over 20 years. Gibson uses the partial equity method to account for its investment in Keller.

Gibson sold Keller land with a book value of $70,000 on January 2, 2020, for $140,000. Keller still holds this land at the end of the current year.

Keller regularly transfers inventory to Gibson. In 2020, it shipped inventory costing $130,000 to Gibson at a price of $200,000. During 2021, intra-entity shipments totaled $250,000, although the original cost to Keller was only $150,000. 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 $70,000 at the end of 2021.

	Gibson Company				Keller Company
Sales	$	(850,000	)		$	(550,000	)
Cost of goods sold		550,000				350,000
Operating expenses		150,000				50,000
Equity in earnings of Keller		(90,000	)			0
Net income	$	(240,000	)		$	(150,000	)
Retained earnings, 1/1/21	$	(1,166,000	)		$	(645,000	)
Net income (above)		(240,000	)			(150,000	)
Dividends declared		140,000				50,000
Retained earnings, 12/31/21	$	(1,266,000	)		$	(745,000	)
Cash	$	174,000			$	60,000
Accounts receivable		366,000				460,000
Inventory		440,000				370,000
Investment in Keller		813,000				0
Land		160,000				440,000
Buildings and equipment (net)		501,000				350,000
Total assets	$	2,454,000			$	1,680,000
Liabilities	$	(548,000	)		$	(475,000	)
Common stock		(640,000	)			(370,000	)
Additional paid-in capital		0				(90,000	)
Retained earnings, 12/31/21		(1,266,000	)			(745,000	)
Total liabilities and equities	$	(2,454,000	)		$	(1,680,000	)

(Note: Parentheses indicate a credit balance.)

1. Prepare a worksheet to consolidate the separate 2021 financial statements for Gibson and Keller.

2. How would the consolidation entries in requirement (a) have differed if Gibson had sold a building on January 2, 2020, with a $85,000 book value (cost of $190,000) to Keller for $150,000 instead of land, as the problem reports? Assume that the building had a 10-year remaining life at the date of transfer.

Prepare Entry *TA to defer the intra-entity gain as of the beginning of the year.

Prepare Entry ED to remove the excess depreciation for the current year created by the transfer price.

GIBSON AND KELLER Consolidation Worksheet For the Year Ending December 31, 2021 Consolidation Entries Accounts Gibson Debit Credit Noncontrolling Consolidated Interest Totals CA $ (850,000) $ 550,000 150,000 (90,000) (240,000) $ Keller (550,000) 350,000 50,000 0 (150,000) $ $ (1,166,000) Sales Cost of goods sold Operating expenses Equity in earnings of Keller Separate company net income Consolidated net income To noncontrolling interest To Gibson Company Retained earnings, 1/1/21Gibson Retained earnings, 1/1/21Keller Net income Dividends declared Retained earnings, 12/31/21 Cash Accounts receivable Inventory Investment in Keller Land Buildings and equipment (net) Customer list Total assets Liabilities Common stock Additional paid-in capital Retained earnings, 12/31/21 Noncontrolling interest 1/1/21 Noncontrolling interest 12/31/21 Total liabilities and equity (240,000) 140,000 $ (1,266,000) $ 174,000 $ 366,000 440,000 813,000 160,000 501,000 (645,000) (150,000) 50,000 (745,000) 60,000 460,000 370,000 440,000 350,000 $ 2,454,000 $ 1,680,000 $ (548,000) $ (475,000) (640,000) (370,000) (90,000) (1,266,000) (745,000) $ (2,454,000) $ (1,680,000) $