Question

Balch acquired 80 percent of Birch's outstanding shares on January 1, 2016, in exchange for $369,000 in cash. The subsidiary's stockholders' equity accounts totaled $353,000 and the noncontrolling interest had a fair value of $92,250 on that day. However, a building (with a ten-year remaining life) in Birch's accounting records was undervalued by $19,000. Balch assigned the rest of the excess fair value over book value to Birch's patented technology (five-year remaining life).

Year	Cost to Birch	Transfer Price to Balch	Inventory Remaining at Year-End (at transfer price)
2016	72,000	130,000	28,000
2017	97,500	150,000	40,500
2018	87,500	175,000	50,000

At December 31, 2018, Balch owes Birch $19,000 for inventory acquired during the period.                                                                                                                                                         

The following separate account balances are for these two companies for December 31, 2018, and the year then ended.  Note: Parentheses indicate a credit balance.

Accounts				Balch	Birch
Sales revenues				$    (868,000)	$       (381,000)
Cost of goods sold				518,000	212,000
Depreciation Expense				86,500	34,000
Amortization Expense				-	-
Other Expenses				99,200	30,000
Equity in earnings of Birch				(59,540)	-
Net income				$    (223,840)	$       (105,000)
Retained earnings, 1/1/18				$    (494,000)	$       (284,000)
Net income (above)				(223,840)	(105,000)
Dividends declared				132,000	22,000
Retained earnings, 12/31/18				$    (585,840)	$       (367,000)
Cash and receivables				$      149,000	$         101,000
Inventory				270,000	151,000
Investment in Birch				456,000	-
Land, buildings, and equipment (net)				967,000	331,000
Patented Technology				-	-
Total assets				$   1,842,000	$         583,000
Liabilities				$    (726,160)	$         (37,000)
Common stock				(530,000)	(179,000)
Retained earnings, 12/31/18				(585,840)	(367,000)
Total liabilities and equity				$(1,842,000)	$       (583,000)

complete the consolidation worksheet for December 31, 2018.

Answer 1

ANSWER

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