Mason Corporation purchased 85% of the common stock of Hudson Company for cash of $10,676,850 on January 1, 2015 when Hudson’s stockholders’ equity consisted of $1,000,000 of common stock and $10,000,000 of retained earnings. The fair value of the non-controlling interest at that date was 1,884,150. All of Hudson’s assets and liabilities had equal fair values and book values except for inventory which had book value $170,000 in excess of fair value and the assets and liabilities in the table below that had fair values in excess of book values for the indicated amounts. The inventory was sold in 2015, and the land had not been sold by the end of 2016 which is the current year. The remaining useful lives and maturities of the others assets and liabilities are indicated in the table below:

Asset/Liability	Excess of Fair Value over Book Value	Remaining Life/Term at Acquisition—1/1/15
Land	$39,000	Unknown
Notes Receivable	50,000	5 years
Copyrights	812,000	7 years
Buildings	280,000	4 years
Equipment	300,000	10 years
Bonds Payable	350000	7 years

Hudson’s 2015 net income was $1,300,000, and it declared and paid $300,000 of dividends.

Mason’s Investment in Hudson had a December 31, 2015 balance of $11,521,750.

Hudson’s December 31, 2016 accounts payable included $83,000 payable to Mason.

The December 31, 2016 pre closing trial balances for Mason and for Hudson are provided in the worksheet.

Problem 1—Prepare all equity method entries required for Mason for 2015 and 2016

Problem 2—Prepare all consolidation entries required to derive the information necessary to report the consolidated entity for 2015 and for 2016.

Trial Balances at December 31, 2016
	Mason Corporation			Hudson Company
Item	Debit	Credit		Debit	Credit
Cash	$      28,289,000			$      2,145,200
Accounts Receivable	33,000,000			4,000,000
Notes Receivable				4,800,000
Investment in Hudson	13,293,150			-
Held-to-Maturity Securities	14,000,000
Inventory	4,300,000			1,500,000
Land	1,650,000			500,000
Buildings	16,000,000			8,600,000
Equipment	8,350,000			5,000,000
Copyrights				600,000
Cost of Goods Sold	48,000,000			14,907,000
Depreciation Expense--Buildings & Equipment	2,900,000			953,000
Amortization Expense				200,000
Other Operating Expenses	370,000			3,172,800
Interest Expense	2,150,000			680,000
Dividends	3,250,000			240,000
Allowance for Doubtful Accounts		2,750,000			325,000
Accumulated Depreciation--Buildings		11,200,000			2,200,000
Accumulated Depreciation--Equipment		3,600,000			1,180,000
Accounts Payable		3,680,000			1,180,200
Bonds Payable		22,500,000			8,000,000
Common Stock		6,600,000			1,000,000
Additional Paid-in Capital		41,083,500
Retained Earnings		22,163,250			11,000,000
Sales		60,000,000			22,000,000
Income from Hudson		1,975,400			-
Interest Revenue		-			412,800
Totals	$   175,552,150	$   175,552,150		$   47,298,000	$   47,298,000

The trial balance for Hudson and Mason for 2016 in is the table above this is a high level financial accounting consolidations problem.

Answer rating: 100% (QA)

Problem 1 Equity Method Entries for Mason Corporation 2015 and 2016 Equity Method Entry for 2015 a R... View the full answer