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 $870,000. At the acquisition date, the fair value of the noncontrolling interest was $580,000 and Kellers book value was $1,160,000. Keller had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $290,000. This intangible asset is being amortized over 20 years.
Gibson sold Keller land with a book value of $50,000 on January 2, 2017, for $120,000. Keller still holds this land at the end of the current year.
Keller regularly transfers inventory to Gibson. In 2017, it shipped inventory costing $238,000 to Gibson at a price of $340,000. During 2018, intra-entity shipments totaled $390,000, although the original cost to Keller was only $253,500. 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 $55,000 at the end of 2018.
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 $155,000 book value (cost of $330,000) to Keller for $290,000 instead of land, as the problem reports? Assume that the building had a 10-year remaining life at the date of transfer.
Gibson Company $ (990,000 $(690,000) Keller Company Sales Cost of goods sold Operatinq expenses Equity in earnings of Keller 690,000 180,000 (90,000 490,000 50,000 $ (210,000) $ (150,000) Net incomee Retained earnings, 1/1/18 Net income (above) Dividends declared $ (1,306,000) (715,000) 150,000) (210,000) 120,000 $ (1,396,000 $188,000 394,000 580,000 1,002,000 160,000 515,000 $ 2,839,000 65,000 (800,000) Retained earnings, 12/31/18 Cash Accounts receivable Inventory Investment in Keller Land Buildings and equipment (net) $ 100,000 600,000 510,000 580,000 490,000 $ 2,280,000 $ (663,000) $(900,000) Totalassets Liabilities Common stock Additional paid-in capital Retained earnings, 12/31/18 (510,000) (70,000) (1,396,000)_ _(800,000) $ (2,839,000) $ (2,280,000) (780,000) Total liabilities and equities (Note: Parentheses indicate a credit balance.) GIBSON AND KELLER Consolidation Worksheet For the Year Ending December 31, 2018 Consolidation Entries Noncontrolling Consolidated Accounts Gibson Keller Debit Credit Interest Totals $ (990,000) S(690,000) 490,000 50,000 Sales Cost of goods sold Operating expenses Equity in earnings of Keller Separate company net income Consolidated net income 690,000 180,000 (90,000) $ (210,000) S (150,000) To noncontrolling interest To GIbson Company Retained earnings, 1/1-Gibson Retained earnings, 1/1-Keller Net income Dividends declared $ (1,306,000) (715,000) (150,000) 65,000 S (1,396,000) S (800,000) $ 188,000S 100,000 600,000 510,000 (210,000) 120,000 Retained earnings, 12/31 Cash Accounts receivable Inventory 394,000 580,000 Investment in Keller Land Buildings and equipment (net) Customer list 1,002,000 160,000 515,000 580,000 490,000 Total assets Liabilities Common stock Additional paid-in capital Retained earnings, 12/31 NCI in Keller, 1/1 NCI in Keller, 12/31 $ 2,839,000 $ 2,280,000 S (663,000) S (900,000) (510,000) (70,000) 1.396,000(80000) (780,000) Total liabilities and equity $ (2,839,000) $ (2,280,000) How would the consolidation entries in requirement (a) have differed if Gibson had sold a building with a $155,000 book value (cost of $330,000) to Keller for $290,000 instead of land, as the problem reports? Assume that the building had a 10-year remaining life at the date of transfer. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required. in the first account field.) view transaction list 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 CreditStep by Step Solution
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