Question
In: Accounting
Here is the entire problem; however the trial balance did not copy in correctly. I need...
Here is the entire problem; however the trial balance did not copy in correctly. I need to know how to calculate the basic consolidation entry (mostly income from Soda Company, Investment in Soda Company, NCI in NI and NCI in NA.
Pop Corporation acquired 70 percent of Soda Company's voting common shares on January 1, 20X2, for $119,000. At that date, the noncontrolling interest had a fair value of $51,000 and Soda reported $70,000 of common stock outstanding and retained earnings of $33,000. The differential is assigned to buildings and equipment, which had a fair value $29,000 higher than book value and a remaining 10-year life, and to patents, which had a fair value $38,000 higher than book value and a remaining life of five years at the date of the business combination. Trial balances for the companies as of December 31, 20X3, are as follows:
Pop Corporation Soda
Company
Item Debit
Credit
Debit Credit
Cash & Accounts Receivable
$ 18,400
$ 24,600
Inventory
168,000
38,000
Land
83,000
43,000
Buildings & Equipment
370,000
263,000
Investment in Soda Company
117,235
Cost of Goods Sold
189,000
82,800
Depreciation Expense
20,000
15,000
Interest Expense
19,000
8,200
Dividends Declared
33,000
18,000
Accumulated Depreciation
$ 143,000
$
75,000
Accounts Payable
95,400
38,000
Bonds Payable
240,790
110,000
Bond Premium
1,600
Common Stock
123,000
70,000
Retained Earnings
130,900
63,000
Sales
263,000
135,000
Other Income
12,600
Income from Soda Company
8,945
$ 1,017,635
$ 1,017,635
$ 492,600
$
492,600
On December 31, 20X2, Soda purchased inventory for $31,200 and sold it to Pop for $48,000. Pop resold $30,000 of the inventory (i.e., $30,000 of the $48,000 acquired from Soda) during 20X3 and had the remaining balance in inventory at December 31, 20X3.
During 20X3, Soda sold inventory purchased for $65,000 to Pop for $100,000, and Pop resold all but $29,000 of its purchase. On March 10, 20X3, Pop sold inventory purchased for $17,000 to Soda for $34,000. Soda sold all but $8,500 of the inventory prior to December 31, 20X3. Assume Pop uses the fully adjusted equity method, that both companies use straight-line depreciation, and that no property, plant, and equipment has been purchased since the acquisition.
Required:
a. Prepare all consolidation entries needed to prepare a full set
of consolidated financial statements at December 31, 20X3, for Pop
and Soda. (If no entry is required for a transaction/event, select
"No journal entry required" in the first account field.)
b. Prepare a three-part consolidation worksheet for 20X3. (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.)
Solutions
Expert Solution
| No | Entry | Accounts | Debit | Credit |
| A | 1 | Common stock | 70000 | |
| Retained earnings | 63000 | |||
| Income from soda company | 16295 | |||
| NCI in NI of soda company | 8805 | |||
| Divdends declared | 18000 | |||
| Investment in soda company | 96795 | |||
| NCI in NA of Soda company | 43305 | |||
| B | 2 | Amortization of expense | 7600 | |
| Depreciation expense | 2900 | |||
| Income from soda company | 7350 | |||
| NCI in NI of Soda Company | 3150 | |||
| C | 3 | Buildings and equipment | 29000 | |
| Patents | 22800 | |||
| Accumulated depreciation | 5800 | |||
| Investment in Soda company | 32200 | |||
| NCI in NA of soda company | 13800 | |||
| D | 4 | Accumulated depreciation | 45000 | |
| Buildings and equipment | 45000 | |||
| E | 5 | Investment in Soda Company | 7350 | |
| NCI in NA of soda company | 3150 | |||
| Cost of goods sold | 10500 | |||
| F | 6 | Investment in soda company | 4410 | |
| NCI in NA of soda company | 1890 | |||
| Inventory | 6300 | |||
| G | 7 | sales | 134000 | |
| Cost of goods sold | 119600 | |||
| Inventory | 14400 | |||
| POP CORPORATION & SUBSIDIARY | |||||
| Consolidated Financial Statement worksheet | |||||
| For 20X3 | |||||
| Consoildated entries | |||||
| Pop Corp. | Soda Co. | DR | CR | Consolidated | |
| Income Statement | |||||
| Sales | $ 263,000 | $ 135,000 | $ 134,000 | $ 264,000 | |
| Other Income | 12,600 | 12,600 | |||
| Less: COGS | (189,000) | (82,800) | 130,100 | (141,700) | |
| Less: Depreciation Expense | (20,000) | (15,000) | 2,900 | (37,900) | |
| Less: Interest Expense | (19,000) | (8,200) | (27,200) | ||
| Less: Amortization Expense | 7,600 | (7,600) | |||
| Income from soda company | 8,945 | 16,295 | 7,350 | ||
| Consolidated Net Income | 56,545 | 29,000 | 160,795 | 137,450 | 62,200 |
| NCI in Net Income | 8,805 | 3,150 | (5,655) | ||
| Controlling interest in Net Income | $ 56,545 | $ 29,000 | $ 169,600 | $ 140,600 | $ 56,545 |
| Statement of Retained Earnings | |||||
| Beginning balance | $ 130,900 | $ 63,000 | $ 63,000 | $ 130,900 | |
| Net Income | 56,545 | 29,000 | 169,600 | 140,600 | 56,545 |
| Less: Divident declared | (33,000) | (18,000) | 18,000 | 33,000 | |
| Ending Balance | $ 154,445 | $ 74,000 | $ 232,600 | $ 158,600 | $ 220,445 |
| Balance sheet | |||||
| Cash and accounts receivable | $ 18,400 | $ 24,600 | $ 43,000 | ||
| Inventory | 168,000 | 38,000 | 20,700 | 185,300 | |
| Land | 83,000 | 43,000 | 126,000 | ||
| Buildings & Equipment | 370,000 | 263,000 | 29,000 | 45,000 | 617,000 |
| Less: Accumulated depreciation | (143,000) | (75,000) | 45,000 | 5,800 | (178,800) |
| Investments in soda company | 117,235 | 11,760 | 128,995 | ||
| Patents | 22,800 | 22,800 | |||
| Total Assets | $ 613,635 | $ 293,600 | $ 108,560 | $ 200,495 | $ 815,300 |
| Accounts payable | $ 95,400 | $ 38,000 | $ 133,400 | ||
| Bonds payable | 240,790 | 110,000 | 350,790 | ||
| Bonds premium | 1,600 | 1,600 | |||
| Common stock |
123,000
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