In a cash transaction, Gil Company purchased 70 percent of the outstanding stock of Cat Company for $296,800 cash on June 30, 2010. Immediately after the acquisition, the separate balance sheets of the companies appeared as shown at the top of the next page.

Additional information: (a) Cat Company’s other assets represent a long-term investment in Gil Company’s long-term debt. The debt was purchased for an amount equal to Gil’s carrying value of the debt. (b) Gil Company owes Cat Company $40,000 for services rendered.

Required

1. Prepare a work sheet for preparing a consolidated balance sheet as of the acquisition date.

2. If you were reading Gil’s consolidated balance sheet, what account would indicate that Gil owned less than 100 percent of Cat and where would you find it on the balance sheet?

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Gil Cat Company Company Assets $ 24,000 $ 160,000 260,000 400,000 296,800 600,000 Cash Accounts receivable 120,000 260,000 Inventory Investment in Cat Company Property, plant, and equipment (net) Other assets 440,000 80,000 20,000 $1,736,800 Total assets $924,000 Liabilities and Stockholders' Equity $ 320,000 Accounts payable Long-term debt Common stock, $10 par value Retained earnings Total liabilities and stockholders' equity $1,736,800 $200,000 300,000 400,000 400,000 800,000 216,800 24,000 $924,000