Question

Following are the individual financial statements for Gibson and Davis for the year ending December 31, 2015:

	Gibson		Davis
Sales	$	(666,000 )	$	(398,000 )
Cost of goods sold		308,000		177,000
Operating expenses		181,000		61,000
Dividend income		(18,000 )		0
Net income	$	(195,000 )	$	(160,000 )
Retained earnings, 1/1/15	$	(760,000 )	$	(415,000 )
Net income		(195,000 )		(160,000 )
Dividends declared		70,000		30,000
Retained earnings, 12/31/15	$	(885,000 )	$	(545,000 )
Cash and receivables	$	306,200	$	148,000
Inventory		512,000		113,000
Investment in Davis		583,800		0
Buildings (net)		545,000		632,000
Equipment (net)		455,000		496,000
Total assets	$	2,402,000	$	1,389,000
Liabilities	$	(887,000 )	$	(504,000 )
Common stock		(630,000 )		(340,000 )
Retained earnings, 12/31/15		(885,000 )		(545,000 )
Total liabilities and stockholders' equity	$	(2,402,000 )	$	(1,389,000 )

Gibson acquired 60 percent of Davis on April 1, 2015, for $583,800. On that date, equipment owned by Davis (with a five-year remaining life) was overvalued by $60,000. Also on that date, the fair value of the 40 percent noncontrolling interest was $389,200.

Davis earned income evenly during the year but declared the $40,000 dividend on November 1, 2015.

a. Prepare a consolidated income statement for the year ending December 31, 2015.

b. Determine the consolidated balance for each of the following accounts as of December 31, 2015.

Answer 1