Reference no: EM131786106

Problem - Potter Corporation acquired 80% ownership of Saturn Inc. on January 1, 2010 for $173,000 cash.  At that date, the fair value of the noncontrolling interest was $43,250. The unadjusted trial balances for the two companies on December 31, 2011 follow:

	Potter		Saturn
	Debit	Credit	Debit	Credit
Cash	$     59,000		$     31,000
Accounts Receivable	83,000		71,000
Inventory	275,000		118,000
Land	80,000		30,000
Buildings and Equipment	500,000		150,000
Investment in Saturn Inc.	215,000
Cost of Goods Sold	490,000		310,000
Depreciation Expense	25,000		15,000
Other Expenses	62,000		100,000
Dividends Declared	45,000		25,000
Accumulated Depreciation		180,000		90,000
Accounts Payable		86,000		30,000
Mortgages Payable		200,000		70,000
Common Stock		300,000		50,000
Retained Earnings		385,000		140,000
Sales		650,000		470,000
Income from Subsidiary		33,000
	$1,834,000	$  1,834,000	$   850,000	$   850,000

Additional Information                                 

1. On January 1, 2010, Saturn reported net assets with a book value of $150,000 and a fair value of $191,250.  The difference between the fair value and book value of Saturn is related entirely to Buildings and Equipment. All of the capital assets in this account have an estimated useful life of 11 years.

2. At December 31, 2011, Potter's management reviewed the amount attributed to goodwill and concluded that goodwill was impaired. The implied fair value of goodwill was $14,000. Goodwill and the impairment was assigned proportionately to the controlling and noncontrolling shareholders.

3. Potter uses the equity method of accounting for its investment in Saturn.

4. As of December 31, 2011, Potter owed Saturn $9,000. This is properly reflected in the year end trial balances.               

Required:

A. Give all eliminating/adjusting entries needed to prepare the consolidated Balance Sheet, Statement of Retained Earnings and Income Statement for December 31, 2011.

B. Prepare the consolidating workpaper as of December 31, 2011.

C. Reconcile the following accounts using a T-Account format from Date of Acquisition to the balance as of 12/31/2011, assuming that Saturn did not declare a dividend in 2010.

Attachment:- Assignment File.rar