Question

1/1/2009 Plymouth acquired 60% interest in Sander in exchange for various considerations totaling $570,000. At the acquisition date,

NCI's FV: $380,000

Sander's BV: $850,000

Sander had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $100,000. This intangible asset is being amortized over 20 years.

Plymouth sold Sander land with a book value of $60,000 on Jan. 2, 2009, for $100,000. Sander still holds this land at the end of the current year.

Sander regularly transfers inventory to Plymouth. In 2009, it shipped inventory costing $100,000 to Plymouth at a price of $150,000. During 2010, intercompany shipments totaled $200,000, although the original cost to Sander was only $140,000. In each of these years, 20% of the merchandise was not resold to outside parties until the period following the transfer.

Plymouth uses the partial equity method. Plymouth owes Sander $40,000 at the end of 2010.

A) Prepare the elimination entires needed to complete a consolidation workpaper for 2010. Use the acquisition method to account for the non-controlling interests in Sander. Include entries such as S, A, I, D, E, P, TI, G, ED, *G, TL, *GL, and any if necessary.

B) Complete the consolidation worksheet for 2010 in the following worksheet.

Pymouth and Sander

Consolidated Worksheet

Year Ending December 31, 2010

Accounts	Plymouth	Sander	Consolidation Entries Debit	Consolidation Entries Credit	Noncontrolling	Consolidated Totals
Sales	(800,000)	(500,000)	(TI)
Cost of Goods Sold	500,000	300,000	(G)	(*G)
				(TI)
Operating expenses	100,000	60,000	(E)
Income of Sander	(84,000)	-0-	(I)
Separate company net income	(284,000)	(140,000)
Consolidated net income
To noncontrolling interest
To parent
RE, 1/1/10--Plymouth	(1,116,000)		(*TL)
			(*C)
RE, 1/1/10--Sander		(620,000)	(*G)
			(S)
Net income (above)	(284,000)	(140,000)				(279,800)
Dividends	115,000	60,000		(D)		115,000
Retained Earnings, 12/31/10	(1,285,000)	(700,000)				(1,231,800)
Cash	177,000	90,000
Accounts recevable	356,000	410,000		(P)
Inventory	440,000	320,000		(G)
Investment in Sander	726,000		(D)	(*C)
				(S)
				(I)
				(A)
Land	180,000	390,000		(*TL)
Buildings and equipment (net)	496,000	300,000
Customer List			(A)	(E)		90,000
Total assets	2,375,000	1,510,000				3,157,000
Liabilities	(480,000)	(400,000)	(P)
Common Stock	(610,000)	(320,000)	(S)
Additional payed-in capital		(90,000)	(S)
Retained earnings, 12/31/10	(1,285,000)	(700,000)
NCI in Sander, 1/1/10				(S)
				(A)
NCI In Sander, 12/31/10
Total Liabilities and Equity	(2,375,000)	(1,510,000)				(3,157,000)

Answer 1

Part A.

Consolidation entries:
Entry	*TL
	Retained Earnings		40,000
	Land			40,000
	Unrealized land gain = 100,000 - 60,000
Entry	*G
	Retained Earnings		10,000
	Cost of Goods Sold			10,000
	Unrealized Gross Profit from 2009 recognized in 2010: 150,000 X 20% = 30,000; 30,000 X 33.33%
Entry	*C
	Retained Earnings 1/1/10		9,000
	Investment in Keller			9,000
	Adjustment to parent company's beginning retained earnigns

Entry	S
	Common Stock		320,000
	APIC		90,000
	Retained Earnings, 1/1/10		610,000
	Investment in Keller			612,000
	Non-Controlling Interest			408,000
	Eliminate the equity accounts of the subsidiary
Entry	A
	Customer List		95,000
	Investment in Keller			57,000
	Non-Controlling Interest			38,000
	To record the value of customer list at beginning of 2013

Entry	I
	Income of Keller		84,000
	Investment in Keller			84,000
	To eliminate intra-entity income
Entry	D
	Investment in Keller		36,000
	Dividends Paid			36,000
	To elminate dividend payment from Keller to Gibson
Entry	E
	Amortization Expense		5,000
	Customer List			5,000
	To record 2013 amortization
Entry	P
	Liabilities		40,000
	Accounts Receivable			40,000
	To eliminate the loan from Keller to Gibson
Entry	TI
	Sales		200,000
	Cost of Goods Sold			200,000
	To elminate sales revenue from Keller to Gibson
Entry	G
	Cost of Goods Sold		12,000
	Inventory			12,000
	To defer 2013 gorss profit