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Mill Corporation acquired 100 percent ownership of Roller Company on January 1, 20X8, for $125,000. At...


Mill Corporation acquired 100 percent ownership of Roller Company on January 1, 20X8, for $125,000. At that date, the fair value of Roller’s buildings and equipment was $19,000 more than the book value. Buildings and equipment are depreciated on a 5-year basis. Although goodwill is not amortized, Mill’s management concluded at December 31, 20X8, that goodwill involved in its acquisition of Roller shares had been impaired and the correct carrying value was $2,600.

     Trial balance data for Mill and Roller on December 31, 20X8, are as follows:
Mill Corporation Roller Company
  Item Debit Credit Debit Credit
  Cash $ 28,500 $ 30,000
  Accounts Receivable 78,000 21,000
  Inventory 98,000 34,000
  Land 48,000 24,000
  Buildings & Equipment 357,000 151,000
  Investment in Roller Co. Stock 125,500
  Cost of Goods Sold 132,000 117,000
  Wage Expense 34,000 18,000
  Depreciation Expense 21,000 6,000
  Interest Expense 8,000 5,000
  Other Expenses 9,500 6,000
  Dividends Declared 34,000 21,300
  Accumulated Depreciation $ 132,000 $ 21,000
  Accounts Payable 34,000 10,000
  Wages Payable 11,000 8,000
  Notes Payable 131,000 113,300
  Common Stock 195,000 59,000
  Retained Earnings 186,700 39,000
  Sales 262,000 183,000
  Income from Subsidiary 21,800
$ 973,500 $ 973,500 $ 433,300 $ 433,300
Required:
a.

Prepare the following consolidating entries needed to prepare a three-part consolidation worksheet as of December 31, 20X8. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Solutions

Expert Solution

a) Preparing all consolidating entries needed to prepare a three-part consolidation worksheet as of December 31, 20X8:
General Journal Debit Credit
Equity Method Entries on Mill Corp.'s Books:
Investment in Roller Co. ($183000-$152000) $31,000
Income from Roller Co $31,000
Record Mill Corp.'s 100% share of Roller Co.'s 20X8 income
Cash $21,300
Investment in Roller Co. $21,300
Record Mill Corp.'s 100% share of Roller Co.'s 20X9 dividend
Income from Roller Co. $2,000
Investment in Roller Co. $2,000
Record amortization of excess acquisition price
Book Value Calculations:
Total Book Value = Common Stock + Retained Earnings
Original book value $98,000 $59,000 $39,000
+ Net Income $31,000 $31,000
- Dividends ($21,300) ($21,300)
Ending book value $107,700 $59,000 $48,700
Basic elimination entry:
General Journal Debit Credit
Common stock $59,000
Retained earnings $39,000
Income from Roller Co. $31,000
Dividends declared $21,300
Investment in Roller Co. $107,700
Excess Value (Differential) Calculations:
Total = Buildings & Equipment Acc. Depr. Goodwill
Beginning balance $17,800 $19,000 ($3,800) $2,600
Changes ($3,800) ($3,800)
Ending balance $14,000 $19,000 ($7,600) $2,600
Amortized excess value reclassification entry:
General Journal Debit Credit
Depreciation expense $3,800
Income from Roller Co. $3,800
Excess Value (differential) reclassification entry:
General Journal Debit Credit
Buildings & Equipment $19,000
Goodwill $2,600
Accumulated depreciation $7,600
Investment in Roller Co. $14,000
Optional accumulated depreciation elimination entry:
General Journal Debit Credit
Accumulated depreciation Nil
Building & equipment Nil

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