Question

Acme Powder Corporation acquired 70 percent of Brown Company’s stock on December 31, 20X7, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 30 percent of Brown Company’s book value. The two companies’ balance sheets on December 31, 20X9, are as follows:


On December 31, 20X9, Acme Powder holds inventory purchased from Brown for $70,000. Brown's cost of producing the merchandise was $50,000. Brown also had purchased inventory from Acme. Brown's ending inventory contains $85,000 of purchases that had cost Acme Powder $60,000 to produce.
On December 30, 20X9, Brown sells equipment to Acme Powder for $90,000. Brown had purchased the equipment for $120,000 several years earlier. At the time of sale to Acme, the equipment had a book value of $40,000. The two companies file separate tax returns and are subject to a 40 percent tax rate. Acme Powder does not record tax expense on its share of Brown's undistributed earnings.

Required
a. Complete a consolidated balance sheet worksheet as of December 31, 20X9.
b. Prepare a consolidated balance sheet as of December 31,20X9.


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  • CreatedMay 23, 2014
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