Pine Corporation acquired 70 percent of Bock Company’s voting common shares on January 1, 20X2, for $108,500. At that date, the noncontrolling interest had a fair value of $46,500 and Bock reported $70,000 of common stock outstanding and retained earnings of $30,000. The differential is assigned to buildings and equipment, which had a fair value $20,000 higher than book value and a remaining 10-year life, and to patents, which had a fair value $35,000 higher than book value and a remaining life of five years at the date of the business combination. Trial balances for the companies as of December 31, 20X3, are as follows:

On December 31, 20X2, Bock purchased inventory for $32,000 and sold it to Pine for $48,000. Pine resold $27,000 of the inventory (i.e., $27,000 of the $48,000 acquired from Bock) during 20X3 and had the remaining balance in inventory at December 31, 20X3.
During 20X3, Bock sold inventory purchased for $60,000 to Pine for $90,000, and Pine resold all but $24,000 of its purchase. On March 10, 20X3, Pine sold inventory purchased for $15,000 to Bock for $30,000. Bock sold all but $7,600 of the inventory prior to December 31, 20X3. Assume Pine 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. Give all elimination entries needed to prepare a full set of consolidated financial statements at December 31, 20X3, for Pine and Bock.
b. Prepare a three-part consolidation worksheet for20X3.

  • CreatedMay 23, 2014
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