Reference no: EM132654090
Question - Comprehensive Illustration
On January 1, 2014, Father Company acquired an 80 percent interest in Sun Company for $425,000. The acquisition-date fair value of the 20 percent noncontrolling interest's ownership shares was $102,500. Also as of that date, Sun reported total stockholders' equity of $400,000: $100,000 in common stock and $300,000 in retained earnings. In setting the acquisition price, Father appraised four accounts at values different from the balances reported within Sun's financial records.
Problem
Buildings (8-year remaining life)
Undervalued by $20,000
Land Undervalued by $50,000
Equipment (5-year remaining life)
Undervalued by $12,500
Royalty agreement (20-year remaining life) Not recorded, valued at $30,000
As of December 31, 2018, the trial balances of these two companies are as follows:
Father Company Sun Company
Debits Current assets $605,000 $280,000
Investment in Sun Company 425,000 -0-
Land 200,000 300,000
Buildings (net) 640,000 290,000
Equipment (net) 380,000 160,000
Expenses 550,000 190,000
Dividends declared 90,000 20,000
Total debits $2,890,000 $1,240,000
Credits Liabilities $910,000 $300,000
Common stock 480,000 100,000
Retained earnings, 1/1/18 704,000 480,000
Revenues 780,000 360,000
Dividend income 16,000 -0-
Total credits $2,890,000 $1,240,000
Included in these figures is a $20,000 payable that Sun owes to the parent company. No goodwill impairments have occurred since the Sun Company acquisition.
Required -
1. Determine consolidated totals for Father Company and Sun Company for the year 2018.
2. Prepare worksheet entries to consolidate the trial balances of Father Company and Sun Company for the year 2018.
3. Assume instead that the acquisition-date fair value of the noncontrolling interest was $104,500. What balances in the December 31, 2018, consolidated statements would change?