Question

On December 31, 20X7, trial balances for Posey and Stargell appeared as follows: Posey Company Stargell Corporation Item Credit Debit Credit Debit Cash $ $ 39,000 49,500 Current Receivables 121,500 90,100 Inventory 317,000 364,900 Investment in Stargell Stock Investment in Stargell Bonds Investment in Posey Bonds 1,243,800 985,000 200,000 Land 518,000 1,241,000 Buildings and Equipment 1,915,000 2,940,000 Cost of Goods Sold 426,000 1,829,000 Depreciation & Amortization Other Expenses 184,000 65,000 632,000 206,000 51,000 Dividends Declared 61,000 $ $1,050,000 597,000 213,000 1,000,000 Accumulated Depreciation 699,190 Current Payables Bonds Payable Premium on Bonds Payable 200,000 3,000 910,000 487,000 Common Stock 610,000 267,000 Premium on Common Stock 2,848,950 457,000 Retained Earnings, January 1 3,010,000 143,000 801,000 Sales 50,000 Other Income 132,660 $9,603,800 Income from Stargell Corp. $ 3,875,000 $ 9,603,800 Total 3,875,000

Answer 1

Answer:

As per the given Question

Part A Fair value of consideration given by Posey 1116900 Fair value of noncontrolling interest at acquisition 124100 Total 1241000 Book value of net assets at acquisition 1161000 Differential at acquisition 80000 Increase in fair value of land (30000) Goodwill at acquisition $50000

Part B Stargell stockholders' equity, January 1, 20X7: Common stock 487000 Premium on common stock 267000 Retained earnings 457000 Stockholders' equity, January 1, 20X7 1211000 Posey's ownership share 90% Book value of shares held by Posey 1089900 Differential at January 1, 20X7 72000 Inventory sale deferred (4860) Balance in Investment in Stargell Stock account 1,157,040January 1, 20X7 1157040

Part E Gain on constructive retirement of Stargell's bonds: Original proceeds from issuance of bonds 1010000 Premium Amortized (6000) Book Value of Bonds 1004000 Price Paid for Stargell bonds by Posey (980000) Gain on constructive retirement of Stargell's bonds $24000

Part C Stargell's 20X7 net income 154000 Add: 20X6 intercompany profit realized in 20X7 5400 Constructive gain on retirement of bonds 24000 Less:Unrealized intercompany profit on 20X7 transfer (5000) (6000) Portion of constructive gain on bond retirement recognized currently by separate affiliates ($24,000 / 4 years Impairment of goodwill (25000) Subsidiary income to be apportioned 147400 Noncontrolling interest's proportionate share 10% Income to noncontrolling interest 14740

Part D Total noncontrolling interest, December 31, 20X6: Stargell's stockholders' equity, December 31, 20X6 1211000 Unrealized Profit (5400) Realized Equity 1205600 Differential assigned to land 30000 Assigned to Goodwill 50000 Total 1285600 NCI Rate 10% Total noncontrolling interest, December 31, 20X6 128560

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