Question

On January 1, 2011, John Doe Enterprises (JDE) acquired a 55% interest in Bubba Manufacturing, Inc. (BMI). JDE paid for the transaction with $3 million cash and 500,000 shares of JDE common stock (par value $1.00 per share). At the time of acquisition, BMI's book value was $16,970,000.

On January 1, JDE stock had a market value of $14.90 per share and there was no control premium in this transaction. Any consideration transferred over book valu is assigned to goodwill. BMI had the following balances on January 1, 2011:

Asset	Book Value	Fair Value
Land	$1,700,000	$2,550,000
Buildings (7 year remaining life)	2,700,000	3,400,000
Equipment (5 year remaining life)	3,700,000	3,300,000

For internal reporting purposes, JDE emplyed the equity method to account for this investment.

The following account balances are for the year ending December 31, 2011 for both companies.

Account	JDE	BMI
Revenues	$(298,000,000)	$(103,750,000
Expenses	271,000,000	95,800,000
Equity in Income of BMI	(4,361,500)	- 0 -
Net Income	$(31,361,500)	$(7,950,000)
Retained Earnings, 1/1/2011	$(2,500,000)	$(100,000)
Net Income (above)	(31,361,500)	(7,950,000)
Dividends Paid	5,000,000	3,000,000
Retained Earnings, 12/31/2011	$(28,861,500)	$(5,050,000)
Current Assets	30,500,000	20,800,000
Investment in BMI	13,161,500
Land	1,500,000	1,700,000
Buildings	5,600,000	2,360,000
Equipment	3,100,000	2,960,000
Total Assets	$53,861,500	$27,820,000
Accounts Payable	$(3,100,000)	$(4,900,000)
Notes Payable	- 0 -	(1,000,000)
Common Stock	(2,900,000)	(6,000,000)
Additional Paid-in Capital	(19,000,000)	(10,870,000)
Retained Earnings, 12/31/2011 (above)	(28,861,500)	(5,050,000)
Total Liabilities and Stockholders' Equity	$(53,861,500)	$(27,820,000)

Required:

Prepare a consolidation worksheet for this business combination. Assume goodwill has been reviewed and there is no goodwill impairment. Provide Consolidation Journal Entries and show all calculations.

Answer 1

Due to time contraints could not do the journal entries, i hope this would be helpful. Please give a like to the solution. Thanks