Plan corporation acquired 80% of the outstanding voting stock of Sal Corporation on January 1, 2017 for $14,000,000, when Sal’s stockholders’ equity consisted of $8,000,000 capital stock and $1,000,000 Retained Earnings. The price reflected a $300,000 undervalued inventory, which was sold in 2017, and a $3,000,000 undervalued building with a 5 year life, from January 1, 2017.

 

Additional Information:

1) Plan sells inventory items to Sal on a regular basis. During 2019 Plan sold $800,000 of inventory (revenue) to Sal. The original cost of the inventory to Plan had been $500,000. The deferred Gross profit on this inventory was $75,000. During 2020, Plan sold inventory to Sal for $500,000 (revenue). The original cost of the inventory had been $200,000. The deferred Gross Profit on the inventory is $50,000. These are all downstream transactions.

2) During 2018 Plan sold land (this is downstream) that cost $1,000,000 to Sal for $1,400,000.

3) Plan sold equipment with a net book value of $600,000 to Sal on January 1, 2020 for $500,000. (This is downstream). The equipment has a 3-year remaining life.

 

Plan uses a full equity method of accounting. The consolidation working papers for December 21, 2020 are on the attached answer sheet. Please provide:

1) The calculations for the intercompany transfers

2) The FMV calculation

3) The Income from Sub Calculation

4) The Investment Account Reconciliation

5) The Consolidation Journal Entries in General Journal Format

6) Finish the consolidation…for December 31, 2020

 

Transcribed Image Text:

Financial Statements at 12/31/20 (In Thousands) Income Statement Sales Loss on sale of Equipment Income from Sun Cost of Sales Depreciation Expense Other Expenses Non-Controlling int. Income Net Income Statement of Retained Earnings Retained Earnings 1/1/20 Net Income -Dividends Retained Earnings 12/31/20 Balance Sheet Cash Accounts Receivable-net Inventories Land Buildings-net Equipment -net Investment in Sun Goodwill Total Assets Total Assets Accounts Payable Other Liabilities Capital Stock Retained Earnings Non Controlling Interest.. 1/1/20 Non Controlling Interest 12/31/20 Total Liab. And Equity Plan 25000 2011.667 -14000 -4000 -3000 6011.667 20000 6011.667 -4000 22011.67 1500 2700 4000 5000 16000 12000 16976.67 Sal 5670 3495 27000 22011.67 11100 -100 -4500 -1500 -2000 3000 5000 3000 -100 7900 1300 2500 2500 2000 3000 5000 58176.67 16300 900 1500 6000 7900 58176.67 16300 Ref F DR Credit Consol Financial Statements at 12/31/20 (In Thousands) Income Statement Sales Loss on sale of Equipment Income from Sun Cost of Sales Depreciation Expense Other Expenses Non-Controlling int. Income Net Income Statement of Retained Earnings Retained Earnings 1/1/20 Net Income -Dividends Retained Earnings 12/31/20 Balance Sheet Cash Accounts Receivable-net Inventories Land Buildings-net Equipment -net Investment in Sun Goodwill Total Assets Total Assets Accounts Payable Other Liabilities Capital Stock Retained Earnings Non Controlling Interest.. 1/1/20 Non Controlling Interest 12/31/20 Total Liab. And Equity Plan 25000 2011.667 -14000 -4000 -3000 6011.667 20000 6011.667 -4000 22011.67 1500 2700 4000 5000 16000 12000 16976.67 Sal 5670 3495 27000 22011.67 11100 -100 -4500 -1500 -2000 3000 5000 3000 -100 7900 1300 2500 2500 2000 3000 5000 58176.67 16300 900 1500 6000 7900 58176.67 16300 Ref F DR Credit Consol

Answer rating: 100% (QA)

To complete the consolidation of Plan Corporation and Sal Corporation as of December 31 2020 I will provide the following 1 Calculations for the intercompany transfers a Inventory transfers 2019 Defer... View the full answer