The individual financial

statements

for Gibson Company and Keller Company for the year ending

December 31, 2013, follow. Gibson acquired a 60 percent interest in

Keller on January 1, 2012, 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, 2012, for

$100,000. Keller still holds this land at the end of the

current year.

"text-align:justify;">Keller

regularly transfers

inventory to Gibson. In 2012, it shipped inventory costing $100,000

to Gibson at a price of $150,000. During 2013, intra-entity

shipments totaled $200,000, 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 $40,000 at the end of

2013.

a) What journal entries are needed to prepare the a worksheet to

consolidate the separate 2013 financial statements for Gibson and

Keller.

b) How would the consolidation entries be different is Gibson

has sold equipment to Keller instead of land for $100,000 with a

book value of $ 60,000. Assume the land has a 10 year remaining

life at the date of transfer.

Gibson Keller

Company Company

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (800,000) ..............$ (500,000)

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . .....500,000 ...................300,000

Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . .....100,000 ...............60,000

Income of Keller Company . . . . . . . . . . . . . . . . . . . . ......(84,000) ...............0

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... . $ (284,000) ...............$ (140,000)

Retained earnings, 1/1/11 . . . . . . . . . . . . . . . . . . . . . $(1,116,000) ...............$ (620,000)

Net income (above) . . . . . . . . . . . . . . . . . . . . . . . ..... . (284,000) ...............(140,000)

Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . ..... . . . 115,000 ...............60,000

Retained earnings, 12/31/11 . . . . . . . . . . . . . . ... . . $(1,285,000) ...............$ (700,000)

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . $ 177,000 ...............$ 90,000

Accounts receivable . . . . . . . . . . . . . . . . . . ..... . . . . . . 356,000 ...............410,000

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . ..... . . . . . . 440,000 ...............320,000

Investment in Keller Company . . . . . . . . . . . . ....... . . . . 726,000 ...............0

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . 180,000 ...............390,000

Buildings and equipment (net) . . . . . . . . . . . ....... . . . . . 496,000 ...............300,000

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,375,000 ...............$ 1,510,000

Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . $ (480,000) ...............$ (400,000)

Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (610,000) ...............(320,000)

Additional paid-in capital . . . . . . . . . . . . . . . . . . . .......... 0 ...................(90,000)

Retained earnings, 12/31/11 . . . . . . . . . . . . . . . . . . (1,285,000) ...............(700,000)

Total liabilities and equities . . . . . . . . . . . . . .. . . . . $(2,375,000) ...............$(1,510,000)