Question

Place Company purchased 92% of the common stock of Shaw, Inc. on January 1, 2017, for $400,000. Trial balances at the end of 2017 for the companies were:

	Place	Shaw
Cash	$   80,350	$ 87,000
Accounts and Notes Receivable	200,000	210,000
Inventory, 1/1	70,000	50,000
Investment in Shaw, Inc.	400,000	—0—
Plant Assets	300,000	200,000
Dividends Declared	35,000	22,000
Purchases	240,000	150,000
Selling Expenses	28,000	20,000
Other Expenses	15,000	13,000
	$1,368,350	$752,000
Accounts and Notes Payable	$   99,110	$ 38,000
Other Liabilities	45,000	15,000
Common Stock, $10 par	150,000	100,000
Other Contributed Captial	279,000	149,000
Retained Earnings, 1/1	225,000	170,000
Sales	550,000	280,000
Dividend Income	20,240	—0—
	$1,368,350	$752,000

Inventory balances on December 31, 2017, were $25,000 for Place and $15,000 for Shaw, Inc. Shaw's accounts and notes payable contain a $15,000 note payable to Place.

Required:

Prepare a workpaper for the preparation of consolidated financial statements on December 31, 2012. The difference between book value of equity acquired and the value implied by the purchase price relates to subsidiary land, which is included in plant assets.

Answer 1

Notes:

. *62,000*0.08 = 4,960 (This is a non-controlling interest so it will not appear in the consolidated balances)

(1) To eliminate intercompany dividends

(2) To allocate the difference between implied and book value to Goodwill. The same denoted in the common stocks and other contributed capital of Shaw inc.

(3) To adjust the Plant assets adjustments

(4) To eliminate the differences between accounts and notes receivables and accounts and notes payable