60.1K

Verified Solution

Link Copied!

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 $690,000. At the acquisition date, the fair value of the noncontrolling interest was $460,000 and Kellers book value was $920,000. Keller had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $230,000. This intangible asset is being amortized over 20 years.

Gibson sold Keller land with a book value of $65,000 on January 2, 2017, for $140,000. Keller still holds this land at the end of the current year.

Keller regularly transfers inventory to Gibson. In 2017, it shipped inventory costing $196,000 to Gibson at a price of $280,000. During 2018, intra-entity shipments totaled $330,000, although the original cost to Keller was only $214,500. 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 $70,000 at the end of 2018.

	Gibson Company				Keller Company
Sales	$	(930,000	)		$	(630,000	)
Cost of goods sold		630,000				430,000
Operating expenses		120,000				90,000
Equity in earnings of Keller		(66,000	)			0
Net income	$	(246,000	)		$	(110,000	)
Retained earnings, 1/1/18	$	(1,246,000	)		$	(685,000	)
Net income (above)		(246,000	)			(110,000	)
Dividends declared		135,000				35,000
Retained earnings, 12/31/18	$	(1,357,000	)		$	(760,000	)
Cash	$	182,000			$	90,000
Accounts receivable		382,000				540,000
Inventory		520,000				450,000
Investment in Keller		918,000				0
Land		240,000				520,000
Buildings and equipment (net)		509,000				430,000
Total assets	$	2,751,000			$	2,030,000
Liabilities	$	(674,000	)		$	(730,000	)
Common stock		(720,000	)			(450,000	)
Additional paid-in capital		0				(90,000	)
Retained earnings, 12/31/18		(1,357,000	)			(760,000	)
Total liabilities and equities	$	(2,751,000	)		$	(2,030,000	)

(Note: Parentheses indicate a credit balance.)

Answer is not complete. How would the consolidation entries in requirement (a) have differed if Gibson had sold a building with a $125,000 book value (cost of $270,000) to Keller for $230,000 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.) No Transaction Accounts Debit Credit Retained earnings 1 1 Buildings Accumulated depreciation Accumulated depreciation 2 2 Operating expenses GIBSON AND KELLER Consolidation Worksheet For the Year Ending December 31, 2018 Consolidation Entries Noncontrolling Interest Consolidated Totals Credit Accounts Gibson Keller Debit Sales $ (630,000) $ (930,000) 330,000 (1,230,000) Cost of goods sold 630,000 430,000 346,800 23,100 736,300 Operating expenses 120,000 90,000 11,500 221,500 Equity in earnings of Keller (66,000) 66,000 $ (246,000) Separate company net income (110,000) Consolidated net income (272.200) 36,880 To noncontrolling interest (36,880) To Gibson Company (235320) $(1,246,000) Retained earnings, 1/1-Gibson (1,154,020) Retained earnings, 1/1-Keller 0 (685,000) Net income (246,000) (110,000) (235,320) Dividends declared 135,000 35,000 21,000 14,000 135,000 $(1,357,000) $ (1,254,340) (760,000) Retained earnings, 12/31 272,000 Cash 182,000 90,000 Accounts receivable 382,000 540,000 70,000 852,000 Inventory 520.000 450,000 23,100 946,900 Investment in Keller 0 21,000 939,000 918,000 Land 75.000 240,000 520,000 685,000 Buildings and equipment (net) 509.000 430,000 939,000 218,500 Customer list 11,500 207,000 2,751,000 2,030,000 3,901,900 Total assets $(674,000) 0 (1,334,000) $ (730,000) 70,000 Liabilities (720,000) 450,000 (720,000) Common stock (450,000) Additional paid-in capital 90,000 (90,000) Retained earnings, 12/31 (760,000) (1,357,000) (1,254,340) NCI in Keller, 1/1 NCI in Keller, 12/31 570.680 (570,680) (593,560) (593,560) Total liabilities and equity $(2,751,000) $(2,030,000) $ 2,057,080 $1,280,100 $ (3,901,900)

Answer & Explanation Solved by verified expert

See Answer