On January 1, 2012, Mitta Corporation acquires a 60% interest (12,000 shares) in Train Company for $156,000. Train stockholders€™ equity on the purchase date is as follows:
Common stock ($5 par) .......... $100,000
Paid-in capital in excess of par ........ 50,000
Retained earnings .............. 80,000
Total stockholders€™ equity ......... $230,000
At the purchase date, Train€™s book values for assets and liabilities closely approximate fair values. Any excess of cost over book value is attributed to goodwill. On January 1, 2013, Train Company sells 5,000 shares of common stock in a public offering at $20 per share. Mitta Corporation purchases 4,000 shares.
During 2013, Mitta sells $30,000 of goods to Train at a gross profit of 25%. There are $6,000 of Mitta goods in Train€™s beginning inventory and $8,000 of Mitta goods in Train€™s ending inventory. Merchandise sales by Train to Mitta are $20,000 during 2013 at a gross profit of 30%.
There are $6,000 of Train goods in Mitta€™s beginning inventory and $2,000 of Train goods in Mitta€™s ending inventory. Intercompany gross profit rates have been constant for many years. There are no inter-company payables/receivables. Mitta€™s investment in Train Company balance is determined as follows:
Original cost ........................ $156,000
60 % of Train 2012 income ($40,000 x 60%) ........... 24,000
Subtotal .......................... $180,000
Less 60% of Train dividends declared in 2012 (60% x $8,000) ..... (4,800)
Subtotal .......................... $175,200
Cost to acquire additional shares (new issue) ............ 80,000
64%ofTrain 2013 income ($50,000 x 64%) ............ 32,000
Subtotal ........................... $287,200
Less 64% of Train dividends declared in 2013 (64% x $10,000) ..... (6,400)
Investment balance, December 31, 2013 .............. $280,800
The trial balances of the two companies as of December 31, 2013, are as follows:

Required
Prepare the worksheet necessary to produce the consolidated financial statements of Mitta Corporation and its subsidiary as of December 31, 2013. Include the determination and distribution of excess and income distribution schedule.

Transcribed Image Text:

Mitta Train CorporationCompan 106,200 113,600 350,000 280,800 63,500 60,000 80,000 Property, Plant, andEquipment. Accounts Payable 1,800,000 360,000 (600,000(89,500) 180,00064,000) (8,000) (26,000) (500,000) Common Stock ($10 par) Paid-In Capital in Excess of Par . . . . Sales . (1,000,000) (125,000) (125,000) (212,600 (112,000) (1,950,000) (600,000) (32,000) 1,170,000 630,000 50,000 0 bsidiary Income 420,000 130,000 10,000 0 Other Expenses