Question

On December 31, 2016, Paladium International purchased 100% of the outstanding common stock of Sennex Chemical inc.. Paladium paid $200,000 for the shares and determined that the fair value of all recorded Sennex assets and liabilities approximated their book values, with the exception of a customer list not recorded on their books that had a fair value of $10,000 and an expected remaining useful life of 5 years. At the time of purchase, Sennex had stockholders’ equity consisting of common stock of $20,000 and retained earnings of $80,000. Any remaining excess fair value was attributed to goodwill. The separate financial statements at December 31, 2017 appear in the first two columns of the consolidation workpapers shown below. Required: Complete the consolidation workpapers for Paladium and Sennex for the year 2017. Paladium Sennex Elimination Debits Entries Credits Consolidated Balance Sheet INCOME STATEMENT Sales $ (331,900) $ (48,000) Income of Sennex (13,000) Cost of Sales 148,000 25,000 Other Expenses 72,000 8,000 Net Income $ (124,900) $ (15,000) Retained Earnings 1/1 $ (846,000) $ (80,000) Add: Net Income (124,900) (15,000) Less: Dividends 9,000 4,000 Retained Earnings 12/31 $ (961,900) $ (91,000) BALANCE SHEET Cash $ 135,000 $ 64,000 Accounts Receivable-net 227,000 160,000 Inventories 316,000 86,000 Land 80,000 40,000 Equipment and Buildings-net 410,200 230,000 Investment in Sennex 209,000 Customer List Goodwill Total Assets $1,377,200 $ 580,000 LIAB. & EQUITY Accounts Payable $ (305,300) $ ( 469,000) Common Stock $ (110,000) $ (20,000) Retained Earnings-12/31 (961,900) (91,000) TOTAL LIAB. AND EQUITY $(1,377,200) $ (580,000)

Answer 1

Consolidation workpapers for Paladium and Sennex for the year 2017

			Eliminations
Particular	Paladium	Sennex	Debit	Credit	Consolidated
Cash	135000	64000			199000
Accounts Receivable	227000	160000			387000
Inventories	316000	86000			402000
Land	80000	40000			120000
Equipment and Buildings	410200	230000			640200
Investment in Sennex	209000	0		209000	0
Goodwill	0	0	109000		109000
Total Assets	1377200	580000			1857200
Accounts Payable	305300	469000			774300
Common Stock	110000	20000	20000		110000
Retained Earnings	961900	91000	80000		972900
Total Liabilities	1377200	580000			1857200

Investment Elimination Entry

Common Stock - Sennex a/c Debit	20000
Retained Earnings a/c Debit	80000
Goodwill a/c Debit	109000
To Investment in Sennex Credit	209000

Consolidation Balance Sheet for Paladium and Sennex for the year 2017

Particulars	Amount	Particulars	Amount
Accounts Payable	774300	Cash	199000
Common Stock	110000	Accounts Receivable	387000
Retained Earnings	972900	Inventories	402000
		Land	120000
		Equipment and Buildings	640200
		Goodwill	109000
Total Liabilities	1857200	Total Assets	1857200