Question

Pop Corporation acquired 70 percent of Soda Company's voting common shares on January 1, 20X2, for $109,200. At that date, the noncontrolling interest had a fair value of $46,800 and Soda reported $71,000 of common stock outstanding and retained earnings of $30,000. The differential is assigned to buildings and equipment, which had a fair value $20,000 higher than book value and a remaining 10-year life, and to patents, which had a fair value $35,000 higher than book value and a remaining life of five years at the date of the business combination. Trial balances for the companies as of December 31, 20X3, are as follows:

	Pop Corporation								Soda Company
Item		Debit			Credit				Debit				Credit
Cash & Accounts Receivable		$	20,400						$	26,600
Inventory			170,000							40,000
Land			85,000							45,000
Buildings & Equipment			390,000							265,000
Investment in Soda Company			113,920
Cost of Goods Sold			191,000							84,800
Depreciation Expense			25,000							20,000
Interest Expense			21,000							7,200
Dividends Declared			35,000							20,000
Accumulated Depreciation					$	145,000							$	90,000
Accounts Payable						97,400								40,000
Bonds Payable						260,400								100,000
Bond Premium														2,600
Common Stock						125,000								71,000
Retained Earnings						132,900								65,000
Sales						265,000								140,000
Other Income						14,600
Income from Soda Company						11,020
		$	1,051,320		$	1,051,320			$	508,600			$	508,600

On December 31, 20X2, Soda purchased inventory for $35,000 and sold it to Pop for $50,000. Pop resold $30,000 of the inventory (i.e., $30,000 of the $50,000 acquired from Soda) during 20X3 and had the remaining balance in inventory at December 31, 20X3.

During 20X3, Soda sold inventory purchased for $56,000 to Pop for $80,000, and Pop resold all but $23,000 of its purchase. On March 10, 20X3, Pop sold inventory purchased for $15,000 to Soda for $30,000. Soda sold all but $7,500 of the inventory prior to December 31, 20X3. Assume Pop uses the fully adjusted equity method, that both companies use straight-line depreciation, and that no property, plant, and equipment has been purchased since the acquisition.

How do I start this

Answer 1

(a) Eliminating Subien (1) jucane hom sobsidiany To Divideuts 10500 Too ·liminate income home decland To trust in Boch company shock Subsidianya $ 11900 = $2000 - $200 - $7000)x:10 slovo - $ 15000X0.70 5.40] 1E (2) Ducane to bom - cashollise 5100 4500 600 Interestale To Dividends declared To Non controlling Interest Assige incane to non-cowholio Sinterest: $5100 = ($28000 $2000 - $7000 + $9000- $8000) X0:30 $4500 = $15000X0:30

Relained Earnings, Jani D. 60,000 1FC3)] caumar stock - Back Company 0,70,000 Differential ate. Dy 46000 " To Inost in Bock 1232.00 company stock. 52800 To non controlling out [elin eliminate beginning Imust balance: : $123,200 -($7090o + $60000 + $46000)*0.7 $ 52,800 = ( $ 70,000+$60000 + $ 76cm) xo-3 camputation of ovamortized differential Fair value of compensation given by pine $ [ORDO Fair vabe of non-coubsoring Interest (-) Book valve of Spencers net Assets. ($10000+ $30,000) Crooooo) 96500 pofferential Aquisition + $55000

(2000) Amoy tiralion of amount oxiguel hoi Buildings % guipment [C420000m x yean] Tours Patent ( 13.000 yiyean) (7000) Unamortired differential=> $46000 Building & Equipment Dr 20000 Patent Dy 28000 2000 To Accemulated depreciation. To sofferential 46000 differential; Assign begruning $28000 = $ 35000 – $7000 $ 2000 = $ 20,000 10 yrs.

Els 2000 Depreciałon Expeuse de Amortization Expense To Acou.dep" Dr 5000 2000 7000 To Patent Amortize defferential $ 2000 = $20000 lours $ 7000 4800 $ 35000 syrs. EC5) Retained Earnings afe DV 1200 Non cannolling init 9000 To COGS fooo To Inventory Eliminate beginning Inventory profit : of Bock Company: $ 1200 = ($48000- $32000) X0.40 $ 4800 = ($48000 - $32000) X0:30 $ 9000 $ 27000-($27000x 443) $ 7000 = $21000-( $21000x})

(E(7) sales the DY 90000 To COGS 82000 8000 To Inventory Eliminate inter caupany Sale of Inentory : © By Bock Company) $7000 - $auoco — (42100039 Dx 30000 &(8) Sales the To COGE To Inoenhey 26 200 3800 of Inventory IOS DO Eliminate intercampany sale by pine Company $3800= $7600-( $7600x(2) [{(9) Relained Earnings All Dr Jaul Nou canbolling Intake or 4500 To land Eliminate wealized profit on landi 15000 - $31000-$22000. 15000

Cb) Pine ine Corporation & Bock company consolidation work poper Dec 31, 2013 Item Pine Bock Ominations carrslibe ted co D Sales Corp >600C0129000) (-1) 70cco (9) 30000 13600 (1) 11200 265000 13600 11 200 Other Income Income hom subsidiony credits COGS 284800 125000 278600 186000 79800 (c)9000 (7)82000 (8)26200 148600 37000 Lee SxPue 200m to (s) 2006 Int. Expense 16000 5200 Amortizatu Exp. (5) 7000 (222000) C100,000) 21200 7000 @3800) 64800 Debits consolidated Net Income Income to non-combolling Interest (2) 5700 (5100)

jucame, Canry Boxenad Geom Pro 10.200 1117010 Belamod Sanninge, Smules crypen (96cm (6)11 200 1101010 117100 Tucome, from above 69800 RSDCO 1415300 117200 CUCO 177100 201900 85000 Druidends declared (30,000 (15:00) (1) 1050 (9)4506 Bocco) Pelained Earnings . Dec. 31st clf 171900 10000 227000 132200 14 7100 $ 7000 Cash & Ales Receivable 15400/21,600 Inventory 165000 35000 16) 7000 (7) 8000 (4) 15000 TOSDOO (8)3800 181200 Land 80,000| 409,000 B & Equipmeut 340.000 269000 (4) 20,000 620,000 Inust in Bock company shock 123900 (1) 700 (3) 123200

(13) 4600 (4) 4600 Differential Patent Debits (4)2810(5)1000 21000 124300356600 964200 Item Pine Bock Eliminations Consoli- ( Corp Dr. Cr dations. Accu. Dep". 140000 80,000 (4) 2000 (5) 2000 224000 I ACC payable 92400 35000 Bonds payable 1200000/1000 Bord premium 1127400 300.000 1600 1600 Comman stock 120000 F0000 (3) 70,000 pine Corp. 120,000 Bock Co. Relained Samming from above 191900/70000 227000 132200 147100 Don-controlling Int. 604800 (2) 600 (4)4500(3)52800 44100 Credits 1724300 $56600 400300 400 300 964200, Note: fpualucial Statements are pot Repuired.

181200 105000 .(221cm) 396000 2 1000 $740,200 Pue (yalni au Say Candidatel Balance Sheel [AS$8752 Dec 31, 2018 Cash and Alor Recoinble Inventory and Buildings & Equipment $620,000 8-) Accu Dep. -Patent Total Assets TUIABILITIES $12.7400 Alc's payable Bonds payable $300000 1600 301600 Bond premium Stock holders Egoity; Contiollæg jut; $ 120,000 Retained sanninge Total controlling int $267100 Non Controlling Int Total Stock holders Equity Total liabilities & Shock holders $740200 Canman stock 147100 44100 311200 SOUTH

Pine Corporation & subsidiary Consolidated Statement of Tucano, Year Ended Dec, 31st, 2013 $265000 13600 $278600 Sales other Income Tchal Income COGS Dep. Expense Int. Expense Amortization Expense Total Expenses $148600 37000 21200 7000 (213800) Consolidated Net Income $64800 Eucame to. Non comholling Int. (5100) Incame to controlling Int. $59700 Pine Corp. & subsidiary comidabel Retained Earnings statement, year ended Dec. 31st 2013 Retained Earnings, Jan 1, 2013 income to conhelling Iul, 10177100 Dividends declared, 2013 Retained Earnings, Dec, 3th, 2013 $147100 1 $117400 59700 20x3 (30000)