Question

On December 31, 2012, Adam Corporation acquired all of the stock of Baker Company. The fair value of Adams’ shares used in the exchange was $37,500,000. At the time of acquisition, the book value of Baker’s shareholders’ equity was $5,000,000, and the book value of Baker’s building (25-year life) exceeded its fair value by $1,000,000. From the date of acquisition to December 31, 2018. Baker had cumulative net income of $1,300,000. For 2019. Baker reported net income of $300,000. Adams uses the complete equity method to account for its investment in Baker. There is no goodwill impairment loss for the period 2013 through 2018, but there is impairment loss of $100,000 in 2019. Baker declared no dividends during the period of 2013-2019.

Required:

Prepare the working paper eliminating entries necessary to consolidate the financial statements of Adams and Baker at December 31,2019.

Answer 1

Above asked question for eliminating entries to consolidate the financial statements of Adams and Baker . Refer below images for more detailed solution.
Solution * Calculation of total godwill is as Follows: particolavs Amount BaIker's reported net income $300 000 Revaluation write offs: 4 C40 000) - Buildings $ 1 000 000 Good u:l impairmeint loss $(100000) Evoity in net încome of $160,000 Baker Calculation of investinerit balance December 31, 2019: at Particolars Investment in Balcer, Amount 1a/31|a012 Balcer reported income, 2013-2018 $ 37 S00 00 $ 1300 o00 $640000) Revaluation write offs: 2013-2018 po0/25)+ 6 Baker, 19 - Boildings ($1000 Do0 Investament in $38560 000 EVoity in net income, a 019 $1 60 00o Investment in Balker, 12/31/2019 387२० ००० Given Note:- dividend during That there is no the period of 2013-2019.

* Consotidation working paper elimin ating entries forr 2019 . * () Eyoity in net incom e of baker Ak Dr $160 000 To Investment in baker $4160000 CE) Stocik holder's evoity - Baker, AL Pr $ 6300 000 To Investment in baker $ 6300 000 working: Stock holders eauity. January ,2019 25000 000 +1300 000 -$63 00 000 $760 000 Buildings ,Cnet) Good will Dr (R) Dr $1500 000 To Investment in baker १२२ 6० co० Depreciation expense ak or Goodwill impáirment $ 40000 loss Ale Dr $100 000 To Borldings, $40000 net TO Good wi'll $100 000 (0)