A) Complete the journal entries for consolidation on December 31, 2015.

B) Prepare a worksheet to finalize the consolidation of Dewey and Truman

C) If shares had been trading at $14.40 instead of $14.90 and a control premium existed, how would the consolidation change and what journal entries would be impacted? Explain why.

On January 1, 2015, Truman Inc. acquired 55% interest in Dewey Corp. Truman Inc. paid for the transaction with $3,000,000 cash and 500,000 shares of common stock (par value of $1.00 per share). At the time of the acquisition Dewey's book value was $16,970,000.

On January 1, Truman stock had a market value of $14.90 per share and there was no control premium in this transaction. Any consideration transferred over book value is assigned to goodwill. Truman had the following balances on January 1, 2015:

	Book Value	Fair Value
Land	$1,700,000	$2,550,000
Buildings (7 year remaining life)	$2,700,000	$3,400,000
Equipment (5 year remaining life)	$3,700,000	$3,300,000

For internal reporting purposes, Truman employed the equity method to account for this investment.

In 2015, Truman purchased $80,000 of inventory from Dewey costing $40,000. At the end of 2015, Truman held $28,000. Truman still owes Dewey for $65,000.

The following account balances are for the year ending December 31, 2015 for both companies:

	Truman	Dewey
Revenues	($298,000,000)	($103,750,000)
Expenses	$271,000,000	$95,800,000
Equity in Income of Dewey Corp.	($4,361,500)	0
Net Income	($31,361,500)	($7,950,000)
Retained Earnings, January 1, 2015	($2,500,000)	($100,000)
Net Income (above)	($31,361,500)	($7,950,000)
Dividends Paid	$5,000,000	$3,000,000
Retained Earnings, December 31, 2015	($28,861,500)	($5,050,000)
Current Assets	$30,500,000	$20,800,000
Investment in Dewey Corp.	$13,161,500
Land	$1,500,000	$1,700,000
Buildings	$5,600,000	$2,360,000
Equipment (net)	$3,100,000	$2,960,000
Total Assets	$53,861,500	$27,820,000
Accounts Payable	($3,100,000)	($4,900,000)
Notes Payable		($1,000,000)
Common Stock	($2,900,000)	(6,000,000)
Additional Paid-In Capital	($19,000,000)	($10,870,000)
Retained Earnings, December 31, 2015 (above)	($28,861,500)	($5,050,000)
Total Liabilities & Stockholder's Equity	($53,861,500)	($27,820,000)

Answer rating: 100% (QA)

Consolidation WorkSheet Truman Dewey Consolidation Entries Non Consolidated ... View the full answer