Assume that on 1/1/01 Big purchases 70% of Little’s outstanding voting stock for $560,000. The fair value of the non-controlling interest on that date was $240,000. Little’s book value on that date was $800,000. All of Little’s assets and liabilities had fair values equal to book values.

• During 2001 Little reported earnings of $200,000 and paid dividends of $40,000.
• During 2002 Little reported earnings of $150,000 and paid dividends of $50,000.

Required:

Prepare elimination entries and consolidation worksheets at date of acquisition as well as at the end of 2001 and 2002 using the worksheets provided.

Worksheet 1
-	Big	Little	Debit	Credit	Consolidated
Cash	30,000	50,000	-	-	-
Receivables	50,000	120,000	-	-	-
Inventory	100,000	150,000	-	-	-
Investment in Little	560,000	-	-	-	-
PPE, net	400,000	500,000	-	-	-
Other Assets	60,000	180,000	-	-	-
-	-	-	-	-	-
Liabilities	300,000	200,000	-	-	-
Common Stock	200,000	100,000	-	-	-
PICEP	300,000	200,000	-	-	-
R/E	400,000	500,000	-	-	-
Non-controlling interest	-	-	-	-	-

At end of 1st year:

Worksheet end of first year
-	Big	Little	Debit	Credit	Consolidated
Sales	800,000	500,000	-	-	-
Less: expenses	500,000	300,000	-	-	-
Add: Investment income	140,000	-	-	-	-
Consolidated income	440,000	200,000	-	-	-
Less: Income to NC interest	-	-	-	-	-
Income to controlling interest	-	-	-	-	-
-	-	-	-	-	-
Beginning R/E	400,000	500,000	-	-	-
Add: Income	440,000	200,000	-	-	-
Less: Dividends	100,000	40,000	-	-	-
Ending R/E	740,000	660,000	-	-	-
-	-	-	-	-	-
Cash	30,000	50,000	-	-	-
Receivables	50,000	120,000	-	-	-
Inventory	100,000	150,000	-	-	-
Investment in Little	672,000	-	-	-	-
PPE, Net	400,000	500,000	-	-	-
Other Assets	88,000	215,000	-	-	-
-	-	-	-	-	-
Liabilities	100,000	75,000	-	-	-
Common Stock	200,000	100,000	-	-	-
PICEP	300,000	200,000	-	-	-
R/E	740,000	660,000	-	-	-
Non-controlling Interest	-	-	-	-	-

At end of 2nd year:

Worksheet for end of second year
-	Big	Little	Debit	Credit	Consolidated
Sales	900,000	550,000	-	-	-
Less: expenses	650,000	400,000	-	-	-
Add: Investment income	105,000	-	-	-	-
Consolidated income	355,000	150,000	-	-	-
Less: Income to NC interest	-	-	-	-	-
Income to controlling interest	-	-	-	-	-
-	-	-	-	-	-
Beginning R/E	740,000	660,000	-	-	-
Add: Income	355,000	150,000	-	-	-
Less: Dividends	80,000	50,000	-	-	-
Ending R/E	1,015,000	760,000	-	-	-
-	-	-	-	-	-
Cash	70,000	50,000	-	-	-
Receivables	200,000	250,000	-	-	-
Inventory	400,000	240,000	-	-	-
Investment in LIttle	742,000	-	-	-	-
PPE, net	400,000	500,000	-	-	-
Other assets	23,000	70,000	-	-	-
-	-	-	-	-	-
Liabilities	320,000	50,000	-	-	-
Common Stock	200,000	100,000	-	-	-
PICEP	300,000	200,000	-	-	-
R/E	1,015,000	760,000	-	-	-
Non-controlling Interest	-	-	-	-	-

Answer rating: 100% (QA)

Certainly Ill guide you through the consolidation process using elimination entries for each of the ... View the full answer