1. Pillow Company acquired 80 percent ownership of Sheet Company on January 1, 20X8 for $173,000. At...
Question:
1. Pillow Company acquired 80 percent ownership of Sheet Company on January 1, 20X8 for $173,000. At that date, the fair value of the noncontrolling interest was $43,250.
2. On January 1, 20X8, Sheet reported net assets with a book value of $150,000 and a fair value of $191,250. The difference between fair value and a book value of Sheet's net assets is as follows: Amount Life Inventory $6,250 all sold in 20X8 Land 20,000 Indefinite Buildings and Equipment 15,000 5 years $41,250
Goodwill Indefinite
3. Accumulated Depreciation on buildings and equipment was $75,000 on the acquisition date.
4. On December 31, 20X8, Pillow's management reviewed the amount attributed to goodwill and concluded goodwill was impaired and should be reduced to $23,000. Goodwill and goodwill impairment were assigned proportionately to the controlling and noncontrolling shareholders.
5. Pillow used the equity method in accounting for its investment in Sheet.
6. Detailed analysis of receivables and payables showed that Pillow owed Sheet $9,000 on December 31, 20X8.
REQUIRED:
1) Consolidation Entries made by Pillow
2) Consolidation worksheet
Pillow Company | Sheet Company | |||
Item | Debit | Credit | Debit | Credit |
Cash | 68,000 | 51,000 | ||
Accounts Receivable | 108,000 | 41,000 | ||
Inventory | 275,000 | 108,000 | ||
Land | 95,000 | 30,000 | ||
Buildings and Equipment | 500,000 | 150,000 | ||
Investment in Sheet Company | 180,000 | |||
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 | 40,000 | ||
Mortgages Payable | 220,000 | 80,000 | ||
Common Stock | 300,000 | 50,000 | ||
Retained Earnings | 385,000 | 100,000 | ||
Sales | 650,000 | 470,000 | ||
Income from Sheet Company | 27,000 | |||
$ 1,848,000 | $ 1,848,000 | $ 830,000 | $ 830,000 | |
Advanced Financial Accounting
ISBN: 978-0078025624
10th edition
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker