On January 1, 2016, Phillips Company acquired 80% of the common stock of Stevens Company for...

 

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On January 1, 2016, Phillips Company acquired 80% of the common stock of Stevens Company for $195,000. On this date, Stevens had total owners' equity of $200,000 (common stock, other paid-in capital, and retained earnings of $10,000, $90,000, and $100,000 respectively). Any excess of cost over book value is attributable to inventory (worth $6,250 more than cost, to equipment (worth $12,500 more than book value), and to patents. FIFO is used for inventories. The equipment has a remaining life of five years and straight-line depreciation is used. The excess attributable to the patents is to be amortized over 20 years. During 2016 and 2017, Phillips has appropriately accounted for its investment in Stevens using the simple equity method. On January 1, 2017, Phillips held merchandise acquired from Stevens for $10,000. During 2017, Stevens sold merchandise to Phillips for $50,000, $20,000 of which is still held by Phillips on December 31, 2017. Stevens' usual gross profit on affiliated sales is 50%. On December 31, 2016, Phillips sold equipment to Stevens at a gain of $10,000. During 2017, the equipment was used by Stevens. Depreciation is being computed using the straight-line method, a five- year life, and no salvage value. Instructions: 1. Prepare a determination and distribution of excess schedule for the information above. 25 points 2. Prepare all necessary worksheet entries for the consolidated worksheet. 50 points 3. Prepare the income distribution schedules for Phillips and Stevens. 25 points 4. Complete the consolidated worksheet. 50 points Trial Balance Consolidated Income Eliminations and NCI Controlling Consolidated Balance Adjutments Retained Account inventory, December 31 other Current Assets Investment ins Phillips Stevens DR CR Statement Earnings Sheet 340.000 60.000 249.000 205,000 295,000 Land Budings & Equipment Accumulated Depreciation 100.000 140,000 400,000 200,000 150.000) 50,000 Patents Other Long Term Liabilities Common Stock-P JOther Paid-in Capital - P Retained Earnings P Current Liabilities Bonds Payable (150.000 100 000) 150.000 (L00,000) (200.000 1120,000 (S0.000 120.000 (350,000 Common Stock-S Jother Paid-in Capital-S Retained Earnings-5 (10,000 (0,000 (150.000 Net Sales ICost of Goods Sold 1610.000) 360,000 (365,000) 190,000 150,000 70,000 Operating Expenses Subudiary Income Dividends Declared - P (84.000) 60.000 30,000 Dividends Declared-S Totals Consolidated Net income To NCI To Controlling Interest Total Nci Controlling interest Totals On January 1, 2016, Phillips Company acquired 80% of the common stock of Stevens Company for $195,000. On this date, Stevens had total owners' equity of $200,000 (common stock, other paid-in capital, and retained earnings of $10,000, $90,000, and $100,000 respectively). Any excess of cost over book value is attributable to inventory (worth $6,250 more than cost, to equipment (worth $12,500 more than book value), and to patents. FIFO is used for inventories. The equipment has a remaining life of five years and straight-line depreciation is used. The excess attributable to the patents is to be amortized over 20 years. During 2016 and 2017, Phillips has appropriately accounted for its investment in Stevens using the simple equity method. On January 1, 2017, Phillips held merchandise acquired from Stevens for $10,000. During 2017, Stevens sold merchandise to Phillips for $50,000, $20,000 of which is still held by Phillips on December 31, 2017. Stevens' usual gross profit on affiliated sales is 50%. On December 31, 2016, Phillips sold equipment to Stevens at a gain of $10,000. During 2017, the equipment was used by Stevens. Depreciation is being computed using the straight-line method, a five- year life, and no salvage value. Instructions: 1. Prepare a determination and distribution of excess schedule for the information above. 25 points 2. Prepare all necessary worksheet entries for the consolidated worksheet. 50 points 3. Prepare the income distribution schedules for Phillips and Stevens. 25 points 4. Complete the consolidated worksheet. 50 points Trial Balance Consolidated Income Eliminations and NCI Controlling Consolidated Balance Adjutments Retained Account inventory, December 31 other Current Assets Investment ins Phillips Stevens DR CR Statement Earnings Sheet 340.000 60.000 249.000 205,000 295,000 Land Budings & Equipment Accumulated Depreciation 100.000 140,000 400,000 200,000 150.000) 50,000 Patents Other Long Term Liabilities Common Stock-P JOther Paid-in Capital - P Retained Earnings P Current Liabilities Bonds Payable (150.000 100 000) 150.000 (L00,000) (200.000 1120,000 (S0.000 120.000 (350,000 Common Stock-S Jother Paid-in Capital-S Retained Earnings-5 (10,000 (0,000 (150.000 Net Sales ICost of Goods Sold 1610.000) 360,000 (365,000) 190,000 150,000 70,000 Operating Expenses Subudiary Income Dividends Declared - P (84.000) 60.000 30,000 Dividends Declared-S Totals Consolidated Net income To NCI To Controlling Interest Total Nci Controlling interest Totals

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