Bower Corporation acquired 60 percent of Concerto Company’s stock on January 1, 20X3, for $24,000 in excess of book value. On that date, the book values and fair values of Concerto’s assets and liabilities were equal and the fair value of the noncontrolling interest was $16,000 in excess of book value. The full amount of the differential at acquisition was assigned to goodwill of $40,000. At December 31, 20X6, Bower management reviewed the amount assigned to goodwill and concluded it had been impaired. They concluded the correct carrying value at that date should be $30,000 and the impairment loss should be assigned proportionately between the controlling and noncontrolling interests.
Balance sheet data for January 1, 20X6, and December 31, 20X6, and income statement data for 20X6 for the two companies are as follows:

On January 1, 20X6, Bower held inventory purchased from Concerto for $48,000. During
20X6, Bower purchased an additional $90,000 of goods from Concerto and held $54,000 of its purchases on December 31, 20X6. Concerto sells inventory to the parent at 20 percent above cost.
Concerto also purchases inventory from Bower. On January 1, 20X6, Concerto held inventory purchased from Bower for $14,000, and on December 31, 20X6, it held inventory purchased from Bower for $7,000. Concerto’s total purchases from Bower were $22,000 in 20X6. Bower sells items to Concerto at 40 percent above cost.
During 20X6, Bower paid dividends of $50,000, and Concerto paid dividends of $20,000.
Assume that Bower uses the fully adjusted equity method that both companies use straight-line depreciation, and that no property, plant, and equipment has been purchased since the acquisition.

a. Prepare all elimination entries needed to complete a consolidation worksheet as of December 31, 20X6.
b. Prepare a three-part consolidation worksheet as of December 31,20X6.

  • CreatedMay 23, 2014
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