Reference no: EM131788035

Shelby Corporation purchases 90% of the outstanding stock of Borner Company on January 1, 2012, for $603,000 cash. At that time, Borner has the following stockholders' equity balances:

Common Stock = $200,000

Paid-In Capital in Excess of Par = $80,000

Retained Earnings = $300,000

All book values approximate fair values except for the plant assets (undervalued by $50,000 and with an estimated remaining life of 10 years). Any remaining excess is goodwill.

DeNoma Company acquires a 60% interest in Shelby on January 1, 2014, for $750,000. At this time, Shelby has consolidated shareholders' equity of:

Common Stock = $500,000

Paid-In Capital in Excess of Par = $150,000

Controlling Retained Earnings = $500,000 (not including amortization of excess price applicable to investment in Borner).

At that time, it is also determined that Shelby's plant assets are undervalued by $50,000 and have a 10-year remaining useful life. Any remaining excess is goodwill.

Intercompany merchandise sales from Borner to Shelby for 2014 are:

Borner's goods in Shelby's beginning inventory = $7,500

Sales during 2014 = $125,000

Borner's goods in Shelby's ending inventory = $10,000

Gross profit on intercompany sales = 80%

On January 1, 2014, Shelby sells plant assets with a cost of $80,000 and accumulated depreciation of $45,000 to DeNoma for $50,000. Remaining useful life on the date of sale is estimated to be 5 years.

Shelby & DeNoma use the partial equity method to account for their investments. The trial balances on December 31, 2015 are as follows:

DeNoma Company	Shelby Corporation	Borner Company
Inventory	75,000	60,000	40,000
Other Current Assets	900,000	2,000	390,000
Plant Assets	1,200,000	800,000	600,000
Accumulated Depreciation	(450,000)	(300,000)	(200,000)
Investment in Shelby Corp	894,000
Investment in Borner Comp	828,000
Common Stock	(1,500,000)	(500,000)	(200,000)
Paid-In Capital in Excess of Par	(150,000)	(80,000)
Retained Earnings	(922,000)	(620,000)	(500,000)
Sales	(900,000)	(700,000)	(600,000)
Cost of Goods Sold	570,000	425,000	400,000
Expenses	205,000	200,000	150,000
Subsidiary Income	(72,000)	(45,000)
Totals	0	0	0

REQUIRED:

Prepare an allocation & amortization schedule for Shelby's investment in Borner and DeNoma's investment in Shelby. (Hint:Shelby's consolidated retained earnings on January 1, 2014 does not include amortization of excess price applicable to investment in Borner).