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 $600,000. At the acquisition date, the fair value of the noncontrolling interest was $400,000 and Kellers book value was $800,000. Keller had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $200,000. This intangible asset is being amortized over 20 years.
Gibson sold Keller land with a book value of $50,000 on January 2, 2014, for $110,000. Keller still holds this land at the end of the current year. |
Keller regularly transfers inventory to Gibson. In 2014, it shipped inventory costing $175,000 to Gibson at a price of $250,000. During 2015, intra-entity shipments totaled $300,000, although the original cost to Keller was only $195,000. 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 $55,000 at the end of 2015.
|
Gibson Company | Keller Company | |||||
Sales | $ | (900,000 | ) | $ | (600,000 | ) |
Cost of goods sold | 600,000 | 400,000 | ||||
Operating expenses | 200,000 | 75,000 | ||||
Equity in earnings of Keller Company | (75,000 | ) | 0 | |||
Net income | $ | (175,000 | ) | $ | (125,000 | ) |
Retained earnings, 1/1/15 | $ | (1,216,000 | ) | $ | (670,000 | ) |
Net income (above) | (175,000 | ) | (125,000 | ) | ||
Dividends declared | 120,000 | 75,000 | ||||
Retained earnings, 12/31/15 | $ | (1,271,000 | ) | $ | (720,000 | ) |
Cash | $ | 179,000 | $ | 60,000 | ||
Accounts receivable | 376,000 | 510,000 | ||||
Inventory | 490,000 | 420,000 | ||||
Investment in Keller Company | 864,000 | 0 | ||||
Land | 210,000 | 490,000 | ||||
Buildings and equipment (net) | 506,000 | 400,000 | ||||
Total assets | $ | 2,625,000 | $ | 1,880,000 | ||
Liabilities | $ | (664,000 | ) | $ | (640,000 | ) |
Common stock | (690,000 | ) | (420,000 | ) | ||
Additional paid-in capital | 0 | (100,000 | ) | |||
Retained earnings, 12/31/15 | (1,271,000 | ) | (720,000 | ) | ||
Total liabilities and equities | $ | (2,625,000 | ) | $ | (1,880,000 | ) |
(Note: Parentheses indicate a credit balance.)
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started