On 1 January 2021, Hayden, Inc., purchased 80% of the common stock of Rossi Manufacturing Company for
Question:
On 1 January 2021, Hayden, Inc., purchased 80% of the common stock of Rossi Manufacturing Company for $6,100,000; the value of the noncontrolling interest on that date was $1,240,000. At the date of purchase the book and fair values of Rossi’s assets and liabilities were as follows:
In addition, the following information is available for this business combination:
• On 1 January 2022, Hayden purchased $1,500,000 par value of Rossi’s 7% bonds for 102. These bonds mature in six years on 31 December, with interest payable annually on 31 December. All companies use the straight-line method to amortize any discounts or premiums.
• As of the acquisition date, the machinery and equipment had an estimated remaining life of six years. All companies use the straight-line method of depreciation.
• During 2023, the following intercompany transactions occurred between Hayden and Rossi:
Hayden sells merchandise to Rossi at cost. Rossi sells merchandise to Hayden at regular selling price including a normal gross profit margin of 35%. There were no intercompany sales between the two companies prior to the current year.
• Adjusted trial balance figures for Hayden and Rossi for 2023 are shown on the following page. Round all computations to the nearest dollar. Ignore income taxes.
Required: Prepare a consolidation worksheet and the appropriate eliminating entries to determine consolidated balances for external financial reporting as of 31 December 2023. You will earn credit for this problem by (1) journalizing the correct consolidating entries, and (2) computing the correct consolidated balances for each line item on the financial statements (including the income to the noncontrolling interest).
Introduction to Financial Accounting
ISBN: 978-0133251036
11th edition
Authors: Charles Horngren, Gary Sundem, John Elliott, Donna Philbrick