Reference no: EM132610706
The individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2018, follow. Gibson acquired a 60 percent interest in Keller on January 1, 2017, in exchange for various considerations totaling $360,000. At the acquisition date, the fair value of the noncontrolling interest was $240,000 and Keller's book value was $470,000. Keller had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $130,000. This intangible asset is being amortized over 20 years.
Gibson sold Keller land with a book value of $60,000 on January 2, 2017, for $120,000. Keller still holds this land at the end of the current year.
Keller regularly transfers inventory to Gibson. In 2017, it shipped inventory costing $108,000 to Gibson at a price of $180,000. During 2018, intra-entity shipments totaled $230,000, although the original cost to Keller was only $161,000. In each of these years, 20 percent of the merchandise was not resold to outside parties until the period following the transfer. Gibson owes Keller $50,000 at the end of 2018.
Gibson Company Keller Company
Sales $(830,000) $(530,000)
Cost of goods sold 530,000 330,000
Operating expenses 130,000 40,000
Equity in earnings of Keller (96,000) 0
Net income $(266,000) $(160,000)
Retained earnings, 1/1/18 $(1,146,000) $(635,000)
Net income (above) (266,000) (160,000)
Dividends declared 130,000 40,000
Retained earnings, 12/31/18 $(1,282,000) $(755,000)
Cash $172,000 $90,000
Accounts receivable 362,000 440,000
Inventory 420,000 350,000
Investment in Keller 783,000 0
Land 140,000 420,000
Buildings and equipment (net) 499,000 330,000
Total assets $2,376,000 $1,630,000
Liabilities $(474,000) $(455,000)
Common stock (620,000) (350,000)
Additional paid-in capital 0 (70,000)
Retained earnings, 12/31/18 (1,282,000) (755,000)
Total liabilities and equities $(2,376,000) $(1,630,000)
(Note: Parentheses indicate a credit balance.)
Question 1: How suppose to look worksheet to consolidate the separate 2018 financial statements for Gibson and Keller.
Question 2: How would the consolidation entries in requirement (a) have differed if Gibson had sold a building with a $75,000 book value (cost of $170,000) to Keller for $130,000 instead of land, as the problem reports? Assume that the building had a 10-year remaining life at the date of transfer.