In: Accounting
Pie Corporation acquired 75 percent of Slice Company’s ownership
on January 1, 20X8, for $96,000. At that date, the fair value of
the noncontrolling interest was $32,000. The book value of Slice’s
net assets at acquisition was $92,000. The book values and fair
values of Slice’s assets and liabilities were equal, except for
Slice’s buildings and equipment, which were worth $18,400 more than
book value. Accumulated depreciation on the buildings and equipment
was $24,000 on the acquisition date. Buildings and equipment are
depreciated on a 10-year basis.
Although goodwill is not amortized, the management of Pie concluded
at December 31, 20X8, that goodwill from its purchase of Slice
shares had been impaired and the correct carrying amount was
$2,600. Goodwill and goodwill impairment were assigned
proportionately to the controlling and noncontrolling
shareholders.
Trial balance data for Pie and Slice on December 31, 20X8, are as
follows:
Pie Corporation | Slice Company | ||||||||||||||||
Item | Debit | Credit | Debit | Credit | |||||||||||||
Cash | $ | 55,500 | $ | 30,000 | |||||||||||||
Accounts Receivable | 88,000 | 21,000 | |||||||||||||||
Inventory | 108,000 | 34,000 | |||||||||||||||
Land | 34,000 | 24,000 | |||||||||||||||
Buildings & Equipment | 358,000 | 166,000 | |||||||||||||||
Investment in Slice Company | 104,070 | ||||||||||||||||
Cost of Goods Sold | 118,000 | 103,000 | |||||||||||||||
Wage Expense | 39,000 | 23,000 | |||||||||||||||
Depreciation Expense | 23,000 | 8,000 | |||||||||||||||
Interest Expense | 10,000 | 2,000 | |||||||||||||||
Other Expenses | 11,500 | 3,000 | |||||||||||||||
Dividends Declared | 32,000 | 15,400 | |||||||||||||||
Accumulated Depreciation | $ | 129,000 | $ | 32,000 | |||||||||||||
Accounts Payable | 28,000 | 9,000 | |||||||||||||||
Wages Payable | 10,000 | 5,000 | |||||||||||||||
Notes Payable | 227,450 | 109,400 | |||||||||||||||
Common Stock | 199,000 | 54,000 | |||||||||||||||
Retained Earnings | 101,000 | 38,000 | |||||||||||||||
Sales | 267,000 | 182,000 | |||||||||||||||
Income from Slice Company | 19,620 | ||||||||||||||||
$ | 981,070 | $ | 981,070 | $ | 429,400 | $ | 429,400 | ||||||||||
b. Prepare a three-part consolidation worksheet for 20X8. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)