Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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 $570,000. At the acquisition date, the fair value of the noncontrolling interest was $380,000 and Kellers book value was $850,000. Keller had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $100,000. This intangible asset is being amortized over 20 years. Gibson sold Keller land with a book value of $60,000 on January 2, 2017, for $100,000. Keller still holds this land at the end of the current year. Keller regularly transfers inventory to Gibson. In 2017, it shipped inventory costing $100,000 to Gibson at a price of $150,000. During 2018, intra-entity shipments totaled $200,000, although the original cost to Keller was only $140,000. 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 $40,000 at the end of 2018.image text in transcribedimage text in transcribedimage text in transcribed

Gibson Company Keller Company Sales Cost of goods sold Operating expenses Equity in earnings of Keller s (800,00e) (500,000) 300,000 60,000 $ (800,000) 500,000 100,000 84,000 Net income $ (284,000) (140,000) Retained earnings, 1/1/18 Net income (above) Dividends declared $(1,116,000) $. (284,000) 115,000 $ (1,285,000) $ (620,000) (140,000) 60,000 Retained earnings, 12/31/18 Cash Accounts receivable Inventory Investment in Keller Land Buildings and equipment (net) $ 177,0 90,000 410,000 320,000 356,000 440,000 726,000 180,000 496,000 390,000 300,000 $ 2,375,00e 1,510 Total assets Liabilities Common stock Additional paid-in capital Retained earnings, 12/31/18 480,000) (400,000) (320,000) (90,000) (1,285,000)_ 790,900) $ (2,375,000) $ (1,510,000) (610,000) Total liabilities and equities 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 $60,000 book value (cost of $140,000) to Keller for $100,000 instead of land, as the problem reports? Assume that the building had a 10-year remaining life at the date of transfer. Gibson Company Keller Company Sales Cost of goods sold Operating expenses Equity in earnings of Keller s (800,00e) (500,000) 300,000 60,000 $ (800,000) 500,000 100,000 84,000 Net income $ (284,000) (140,000) Retained earnings, 1/1/18 Net income (above) Dividends declared $(1,116,000) $. (284,000) 115,000 $ (1,285,000) $ (620,000) (140,000) 60,000 Retained earnings, 12/31/18 Cash Accounts receivable Inventory Investment in Keller Land Buildings and equipment (net) $ 177,0 90,000 410,000 320,000 356,000 440,000 726,000 180,000 496,000 390,000 300,000 $ 2,375,00e 1,510 Total assets Liabilities Common stock Additional paid-in capital Retained earnings, 12/31/18 480,000) (400,000) (320,000) (90,000) (1,285,000)_ 790,900) $ (2,375,000) $ (1,510,000) (610,000) Total liabilities and equities 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 $60,000 book value (cost of $140,000) to Keller for $100,000 instead of land, as the problem reports? Assume that the building had a 10-year remaining life at the date of transfer

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

Accounting For Managers Interpreting Accounting Information For Decision Making

Authors: Paul M. Collier

3rd Edition

0470777648, 9780470777640

More Books

Students also viewed these Accounting questions

Question

Is filtering always dysfunctional? Why or why not?

Answered: 1 week ago

Question

What is a (a) dichotomous variable? (b) binary variable?

Answered: 1 week ago

Question

What would you do?

Answered: 1 week ago