In January 1, 2019, Strolle Company acquired an 70% interest in Hailey Company for a purchase...

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In January 1, 2019, Strolle Company acquired an 70% interest in Hailey Company for a purchase price that was $500,000 over the book value of Hailey's Stockholders' Equity on the acquisition date. Spring uses the equity method to account for its investment in Hailey. Strolle assigned the acquisition-date AAP as follows: 30 Points AAP Items Patent Goodwill Initial Fair Value 350,000 150,000 $500,000 Hailey sells inventory to Strolle (upstream) which includes that inventory in products that it (Strolle), ultimately, sells to customers outside of the controlled group. You have compiled the following data as of 2024 and 2025: Transfer price for inventory sale Cost of goods sold Gross profit % inventory remaining Gross profit deferred 2025 $500,000 -440,000 60,000 40% $24,000 EOY Receivable/Payable $42,000 $18,000 The inventory not remaining at the end of the year has been sold outside of the controlled group. Strolle and Hailey report the following financial statements at December 31, 2025: Income Statement Sales Cost of goods sold Gross Profit Income (loss) from subsidiary Operating expenses Net income Useful Life (years) 10 Indefinite L BOY Retained Earnings Net income Dividends EOY Retained Earnings 2024 $305,500 -259,675 $45,825 50% $22,913 Strolle $4,500,000 -3,825,000 675,000 13,939 Statement of Retained Earnings Strolle $4,465,000 365,939 -105,400 $4,725,539 -323,000 $365.939 Hailey $750,000 (660,000) 90,000 -34,000 $56.000 Hailey $440,000 56,000 -10,000 $486.000 + Assets: Cash Accounts receivable Inventory Equity Investment PPE, net Liabilities and Stockholders' Equity: Current Liabilities Long-term Liabilities Common Stock APIC Retained Earnings Balance Sheet B Strolle O $420,000 304,000 654,000 782,600 6,723,539 $8,884,139 $340,000 1,750,000 853,600 1,215,000 4,725,539 $8,884.139 Hailey $425,000 545,000 425,000 420,000 $1,815,000 Required: a. Compute the EOY noncontrolling interest equity balance. b. Prepare the consolidation journal entries as of December 31, 2025: $175,000 753,000 92,100 308,900 486,000 $1,815.000 In January 1, 2019, Strolle Company acquired an 70% interest in Hailey Company for a purchase price that was $500,000 over the book value of Hailey's Stockholders' Equity on the acquisition date. Spring uses the equity method to account for its investment in Hailey. Strolle assigned the acquisition-date AAP as follows: 30 Points AAP Items Patent Goodwill Initial Fair Value 350,000 150,000 $500,000 Hailey sells inventory to Strolle (upstream) which includes that inventory in products that it (Strolle), ultimately, sells to customers outside of the controlled group. You have compiled the following data as of 2024 and 2025: Transfer price for inventory sale Cost of goods sold Gross profit % inventory remaining Gross profit deferred 2025 $500,000 -440,000 60,000 40% $24,000 EOY Receivable/Payable $42,000 $18,000 The inventory not remaining at the end of the year has been sold outside of the controlled group. Strolle and Hailey report the following financial statements at December 31, 2025: Income Statement Sales Cost of goods sold Gross Profit Income (loss) from subsidiary Operating expenses Net income Useful Life (years) 10 Indefinite L BOY Retained Earnings Net income Dividends EOY Retained Earnings 2024 $305,500 -259,675 $45,825 50% $22,913 Strolle $4,500,000 -3,825,000 675,000 13,939 Statement of Retained Earnings Strolle $4,465,000 365,939 -105,400 $4,725,539 -323,000 $365.939 Hailey $750,000 (660,000) 90,000 -34,000 $56.000 Hailey $440,000 56,000 -10,000 $486.000 + Assets: Cash Accounts receivable Inventory Equity Investment PPE, net Liabilities and Stockholders' Equity: Current Liabilities Long-term Liabilities Common Stock APIC Retained Earnings Balance Sheet B Strolle O $420,000 304,000 654,000 782,600 6,723,539 $8,884,139 $340,000 1,750,000 853,600 1,215,000 4,725,539 $8,884.139 Hailey $425,000 545,000 425,000 420,000 $1,815,000 Required: a. Compute the EOY noncontrolling interest equity balance. b. Prepare the consolidation journal entries as of December 31, 2025: $175,000 753,000 92,100 308,900 486,000 $1,815.000

Answer rating: 100% (QA)

1 Group structure Journal entries on consolidation Strolle Debit Credit at Jan 1 2019 70 Goodwill 76... View the full answer