Problem 5-35 (LO 5-1, 5-2, 5-3, 5-4, 5-5, 5-6, 5-7)

The individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2018, follow. Gibson acquired a 60 percent interest in Keller on January 1, 2017, in exchange for various considerations totaling $930,000. At the acquisition date, the fair value of the noncontrolling interest was $620,000 and Kellers book value was $1,240,000. Keller had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $310,000. This intangible asset is being amortized over 20 years.

Gibson sold Keller land with a book value of $60,000 on January 2, 2017, for $140,000. Keller still holds this land at the end of the current year.

Keller regularly transfers inventory to Gibson. In 2017, it shipped inventory costing $216,000 to Gibson at a price of $360,000. During 2018, intra-entity shipments totaled $410,000, although the original cost to Keller was only $287,000. In each of these years, 20 percent of the merchandise was not resold to outside parties until the period following the transfer. Gibson owes Keller $65,000 at the end of 2018.

	Gibson Company				Keller Company
Sales	$	(1,010,000	)		$	(710,000	)
Cost of goods sold		710,000				510,000
Operating expenses		200,000				60,000
Equity in earnings of Keller		(84,000	)			0
Net income	$	(184,000	)		$	(140,000	)
Retained earnings, 1/1/18	$	(1,326,000	)		$	(725,000	)
Net income (above)		(184,000	)			(140,000	)
Dividends declared		130,000				75,000
Retained earnings, 12/31/18	$	(1,380,000	)		$	(790,000	)
Cash	$	190,000			$	70,000
Accounts receivable		398,000				620,000
Inventory		600,000				530,000
Investment in Keller		1,032,000				0
Land		180,000				600,000
Buildings and equipment (net)		517,000				510,000
Total assets	$	2,917,000			$	2,330,000
Liabilities	$	(737,000	)		$	(920,000	)
Common stock		(800,000	)			(530,000	)
Additional paid-in capital		0				(90,000	)
Retained earnings, 12/31/18		(1,380,000	)			(790,000	)
Total liabilities and equities	$	(2,917,000	)		$	(2,330,000	)

(Note: Parentheses indicate a credit balance.)

1. Prepare a worksheet to consolidate the separate 2018 financial statements for Gibson and Keller.

2. How would the consolidation entries in requirement (a) have differed if Gibson had sold a building with a $165,000 book value (cost of $350,000) to Keller for $310,000 instead of land, as the problem reports? Assume that the building had a 10-year remaining life at the date of transfer.

For the Year Ending December 31, 2018 Consolidation Entries Accounts Gibson Keller Debit Credit Noncontrolling Consolidated Interest Totals $ $ (1,010,000) 710,000 200,000 (84,000)| $ (184,000) (710,000) 510,000 60,000 0 (140,000) $ $ (1,326,000) ( 1 ) $ $ Sales Cost of goods sold Operating expenses Equity in earnings of Keller Separate company net income Consolidated net income To noncontrolling interest To Gibson Company Retained earnings, 1/1-Gibson Retained earnings, 1/1-Keller Net income Dividends declared Retained earnings, 12/31 Cash Accounts receivable Inventory Investment in Keller Land Buildings and equipment (net) Customer list Total assets Liabilities Common stock Additional paid-in capital Retained earnings, 12/31 NCI in Keller, 1/1 NCI in Keller, 12/31 Total liabilities and equity (184,000) 130.000 $ (1,380,000) $ 190,000 398,000 600,000 1,032,000 180,000 517,000 (725,000) (140,000) 75,000 (790,000) 70,000 620,000 530,000 600,000 510,000 $ $ 2,917,000 (737,000) (800,000) $ $ 2,330,000 (920,000) (530,000) (90,000) (790,000) (1,380,000) $ (2,917,000) $ (2,330,000) Required A Required B How would the consolidation entries in requirement (a) have differed if Gibson had sold a building with a $165,000 book value (cost of $350,000 to Keller for $310,000 instead of land, as the problem reports? Assume that the building had a 10-year remaining life at the date of transfer. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Show less A view transaction list Consolidation Worksheet Entries Prepare Entry *TA to defer the intra-entity gain as of the beginning of the year. Note: Enter debits before credits. Transaction Accounts Debit Credit Record entry Clear entry view consolidation entries