Reference no: EM132210532

TASK 1

Big Company acquired 75 percent of Little Company's stock at underlying book value on January 1, 20X8. At that date, the fair value of the non-controlling interest was equal to 25 percent of the book value of Little Company. Little Company reported shares outstanding of OMR350,000 and retained earnings of OMR 100,000. During 20X8, Little Company reported net income of $60,000 and paid dividends of OMR 3,000.

In 20X9, Little Company reported net income of OMR 90,000 and paid dividends of OMR 15,000. The following transactions occurred between Big Company and Little Company in 20X8 and 20X9:

Little Co. sold equipment to Big Co. for a OMR 42,000 gain on December 31, 20X8. Little Co. had originally purchased the equipment for OMR 140,000 and it had a carrying value of OMR 28,000 on December 31, 20X8. At the time of the purchase, Big Co. estimated that the equipment still had a seven-year remaining useful life.

Big sold land costing OMR 90,000 to Old Company on June 28, 20X9, for OMR 110,000.

Required:

Give all eliminating entries needed to prepare a consolidation worksheet for 20X9 assuming that Big Co. uses the modified equity method to account for its investment in Old Company