Question

) Matthews Co. acquired all of the common stock of Jackson Co. on January 1, 2017. As of that date, Jackson had the following trial balance: Debit Credit Accounts payable $ 60,000 Accounts receivable $ 50,000 Additional paid-in capital 60,000 Buildings (net) (20-year life) 140,000 Cash and short-term investments 70,000 Common stock 300,000 Equipment (net) (8-year life) 240,000 Intangible assets (indefinite life) 110,000 Land 90,000 Long-term liabilities (mature 12/31/19) 180,000 Retained earnings, 1/1/17 120,000 Supplies 20,000 Totals $ 720,000 $ 720,000 - During 2017, Jackson reported net income of $96,000 while paying dividends of $12,000. During 2018, Jackson reported net income of $132,000 while paying dividends of $36,000. Assume that Matthews Co. acquired the common stock of Jackson Co. for $588,000 in cash. As of January 1, 2017, Jackson's land had a fair value of $102,000, its buildings were valued at $188,000, and its equipment was appraised at $216,000. Any excess of consideration transferred over fair value of assets and liabilities acquired is due to an unamortized patent to be amortized over 10 years. Matthews decided to use the equity method for this investment. Required: (A.) Prepare consolidation worksheet entries for December 31, 2017. (B.) Prepare consolidation worksheet entries for December 31, 2018.

Answer 1

Particulars	Amount	Life	Annual Amortization
Purchase Price of Jackson Co.	$588,000
Book value	($480,000)
Excess of cost over book value	$108,000
Excess cost assigned to specific accounts based on fair market values
Land	12000	-	-
Building	$48,000	20	2400
Equipment	($24,000)	5	-4800
Goodwill	$72,000	10	7200
Total			4800

Answer:1 Consolidated Work sheet Entries-2017

Entry S

Common stock-Jackson co. A/C Dr. $300,000

Additional Paid in capital A/C Dr.    $60000

Retained Earnings A/C (1/1/2017) Dr $120,000

      To investment in Jackson company A/C                  $480000

Entry A:

Land A/C Dr.                $12000

Building A/C Dr.            $48000

Goodwill A/C Dr.          $72000

   To Equipment A/C                                            $24000

      To investment in Jackson company A/C                      $108000

Entry I:

Investment income A/C Dr. $91200

             To investment in Jackson company A/C                  $91200

Entry D:

Investment in Jackson company A/C Dr. $12000

          To Dividend paid A/C                                      $12000

Entry E:

Expense A/C Dr. $4800

Equipment A/C Dr.$4800

     To Building A/c                    $2400

     To Goodwill A/C                   $7200

Answer 2)Consolidated Work sheet entries-2018

Entrys

Common stock-Jackson co. A/C Dr. $300,000

Additional Paid in capital A/C Dr.    $60000

Retained Earnings A/C(1/1/2013) Dr.$204,000

      To investment in Jackson company A/C                  $564000

Entry A:

Land A/C Dr.                $12000

Building A/C Dr.            $45600

Goodwill A/C Dr.          $64800

   To Equipment A/C                                            $19200

      To investment in Jackson company A/C                      $103200

Entry I:

Investment income A/C Dr. $127200

             To investment in Jackson company A/C                  $127200

Entry D:

Investment in Jackson company A/C Dr. $36000

          To Dividend paid A/C                                      $36000

Entry E:

Expense A/C Dr. $4800

Equipment A/C Dr.$4800

     To Building A/c                    $2400

     To Goodwill A/C                   $7200