Question

Jet Corp. acquired all of the outstanding shares of Nittle Inc. on January 1, 2011, for $644,000 in cash. Of this price, $42,000 was attributed to equipment with a ten-year remaining useful life. Goodwill of $56,000 had also been identified. Jet applied the partial equity method so that income would be accrued each period based solely on the earnings reported by the subsidiary.

On January 1, 2014, Jet reported $280,000 in bonds outstanding with a book value of $263,200. Nittle purchased half of these bonds on the open market for $135,800.

During 2014, Jet began to sell merchandise to Nittle. During that year, inventory costing $112,000 was transferred at a price of $140,000. All but $14,000 (at Jet’s selling price) of these goods were resold to outside parties by year's end. Nittle still owed $50,400 for inventory shipped from Jet during December.

The following financial figures were for the two companies for the year ended December 31, 2014.

   Jet Corp.   Nittle Inc.

Revenues   $(894,600)   $(652,400)

Cost of goods sold      483,000       277,200

Expenses      187,600       225,400

Interest expense-bonds      33,600       0

Interest income-bond investment      0       (15,400)

Equity in income of Nittle Inc.      (165,200)       0

Net income   $(355,600)   $ (165,200)

      

Retained earnings, January 1, 2014   $(483,000)   $(505,400)

Net income (above)      (355,600)      (165,200)

Dividends paid      217,000      85,400

Retained earnings, December 31, 2014   $(621,600)   $(585,200)

      

Cash and receivables      $186,200   $109,200

Inventory      239,400      121,800

Investment in Nittle Inc.      851,200      0

Investment in Jet Corp. bonds      0       137,200

Land, buildings, and equipment (net)       348,600       757,400

Total assets   $ 1,625,400   $1,125,600

      

Accounts payable      $(315,000)       $(232,400)

Bonds payable      (280,000)      (140,000)

Discount on bonds payable    11,200       0

Common stock      (420,000)      (168,000)

Retained earnings, December 31,2014 (above)      (621,600)      (585,200)

Total liabilities and stockholders’ equity   $(1,625,400)   $(1,125,600)

Required:

Prepare consolidation worksheet entries for December,31 2014

Answer 1

CONSOLIDATED WORK SHEET:

   CONSOLIDATED ENTRIES CONSOLIDATED BALANCE

Particulars jet corp nittle inc Dr Cr

Revenues -894600 -652400 140000 (TI)   - 1407000

cost of goods sold 483000 277200 2800 (G) 140000 (TI) 623000

expenses 187600 225400 4200 (E) 417200

interest expenses-bonds    33600 16800 (B) 16800

interest income-bond invstmnt -15400 15400 (B)

Loss on extinguishment of debt 4200 (B) 4200

equity in nittle income -165200 165200(I)

net income -355600 -165200 -345800

retained earnings 1/1/14 (jet) -483000 12600 (C*) -470400

retained earnings 1/1/14 (nittle) -505400 505400(S)

net income -355600 -165200 -345800

dividends paid 217000 85400 85400(D) 217000

retained earnings 12/31/14 -621600 -585200 -599200

cash and receivables 186200 109200 50400(P) 245000

inventory 239400 121800 2800 (G) 358400

investment in nittle 851200 85400 (D) 12600 (C*)

673400 (S)

85400(A)

165200 (I)

investment in jet corp bonds 137200 137200 (B)

land, building and equipment 348600 757400 29400(A) 4200(E) 1131200

goodwill 56000 (A) 56000

Total assets 1625400 1125600 1790600

Accounts payable -315000 -232400 50400 (P) -497000

Bonds payable -280000 -140000 140000 (B) -280000

discount on bonds payable 11200 5600 (B) 5600

common stock -420000 -168000 168000 (S) -420000

retained earnings 12/31/14 -621600 -585200 -599200

Total liabilities and stock

holder's equity -1625400 -1125600 -1790600

--------------HOPE THIS IS HELPFUL