Chapter 7 A Saved Help Save & Exit Submit Check my work 5 House Corporation has been operating profitably since its creation in 1960. At the beginning of 2019, House acquired a 70 percent ownership in Wilson Company. At the acquisition date, House prepared the following fair-value allocation schedule: 2.85 points $ 861,000 369,000 $ 1,230,000 853,000 $ $ 377,000 Consideration transferred for 70% interest in Wilson Fair value of the 30% noncontrolling interest Wilson business fair value Wilson book value Excess fair value over book value Assignments to adjust Wilson's assets to fair value: To buildings (20-year remaining life) To equipment (4-year remaining life) To franchises (10-year remaining life) To goodwill (indefinite life) eBook $ 103,000 (24.600) 82,500 160 980 216,180 $ Print House regularly buys inventory from Wilson at a markup of 25 percent more than cost. House's purchases during 2019 and 2020 and related ending inventory balances follow: References Year 2019 2020 Intra-Entity Remaining Intra-Entity Inventory Purchases End of Year (at transfer price) $120,000 $40,000 150,000 60,000 On January 1, 2021, House and Wilson acted together as co-acquirers of 80 percent of Cuddy Company's outstanding common stock. The total price of these shares was $284,000, indicating neither goodwill nor other specific fair-value allocations. Each company put up one-half of the consideration transferred. During 2021, House acquired additional inventory from Wilson at a price of $258,000. Of this merchandise, 45 percent is still held at year-end. Following are the financial records for the three companies for 2021. $ Wilson Company (898, 800) 391,000 303,000 $ $ $ $ Sales and other revenues Cost of goods sold Operating expenses Income of Wilson Company Income of Cuddy Company Net income Retained earnings, 1/1/21 Net income (above) Dividends declared Retained earnings, 12/31/21 Cash and receivables Inventory Investment in Wilson Company Investment in Cuddy Company Buildings Equipment Land Total assets Liabilities Common stock Retained earnings, 12/31/21 Total liabilities and equities House Corporation $ (943,440) 588,000 270,000 (143,360) (30, 200) $ (259,000) $ (853,000) (259,000) 100,000 $ (1,012,000) $ 37, 140 416,300 1,039, 360 148,200 348,000 304,000 228,000 $ 2,521,000 $ (689, 000) (820,000) (1,012,000) $ (2,521,000) Cuddy Company (400,200) 230,000 94,700 0 0 (75,500) (205,000) (75,500) 60,000 (220,500) 81,000 167,800 0 0 151,000 90,300 22,400 512,500 (142,000) (150,000) (220,500) (512,500) (30, 200) $ (235,000) $ (689, 000) (235,000) 96,000 $ (828,000) $ 196,800 390,000 @ 148,200 406,000 204,000 374,000 $ 1,719,000 $ (581,000) (310,000) (828,000) $ (1,719,000) $ $ $ Note: Parentheses indicate a credit balance. Prepare a consolidation worksheet for 2021. The partial equity method based on separate company incomes has been applied to each investment. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Input all amounts as positive values.) Noncontrolling Consolidated Interest Balance 0 HOUSE CORPORATION AND CONSOLIDATED SUBSIDIARIES Consolidation Worksheet December 31, 2021 Consolidation Entries House Wilson Cuddy Accounts Debit Credit Corporation Company Company Sales and other revenue 943,440 898,800 400,200 Cost of goods sold 588,000 391,000 230,000 Operating expenses 270,000 303,000 94,700 Income of Wilson Company 143,360 Income of Cuddy Company 30,200 30,200 Net income 259,000 235,000 75,500 Consolidated net income Net income attributable to noncontrolling interest (Wilson) Net income attributable to noncontrolling interest (Cuddy) Net income attributable to House Corporation Retained earnings, 1/1/21: House Corporation 853,000 Wilson Company 689,000 Cuddy Company 205,000 Net income 259,000 235,000 75,500 Dividends declared House Corporation 100,000 Wilson Company 96,000 Cuddy Company 60,000 Retained earnings, 12/31/21 1,012,000 828,000 220,500 Cash and receivables 196,800 81,000 Inventory 416,300 390,000 167,800 Investment in Wilson Company 1,039,360 Investment in Cuddy Company 148,200 148,200 0 0 37,140 390,000 167,800 Inventory Investment in Wilson Company Investment in Cuddy Company Buildings Equipment 416,300 1,039,360 148,200 348,000 304,000 228,000 151,000 148,200 406,000 204,000 374,000 90,300 22,400 Land Goodwill Franchise contracts Total assets 512,500 0 2,521,000 689,000 1,719,000 581,000 Liabilities 142,000 Noncontrolling interest in Cuddy Noncontrolling interest in Wilson Noncontrolling interest in subsidiary companies Common stock 0 Retained earnings Total liabilities and equities 820,000 1,012,000 2,521,000 310,000 828,000 1,719,000 150,000 220,500 512,500 0 0 0