Question

The Individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2021, follow. Gibson acquired a 60 percent Interest in Keller on January 1, 2020, in exchange for various considerations totaling $1,050,000. At the acquisition date, the fair value of the noncontrolling Interest was $700,000 and Keller's book value was $1,400,000. Keller had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value $350,000. This Intangible asset is being amortized over 20 years. Gibson uses the partial equity method to account for its Investment In Keller. Gibson sold Keller land with a book value of $80,000 on January 2, 2020, for $180,000. Keller still holds this land at the end of the current year. Keller regularly transfers Inventory to Gibson. In 2020, It shipped Inventory costing $280,000 to Gibson at a price of $400,000. During 2021, Intra-entity shipments totaled $450,000, although the original cost to Keller was only $292,500. 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 $40,000 at the end of 2021. Sales Cost of goods sold Operating expenses Equity in earnings of Keller Net income Retained earnings, 1/1/21 Net income (above) Dividends declared Retained earnings, 12/31/21 Cash Accounts receivable Inventory Investment in Keller Land Buildings and equipment (net) Total assets Liabilities Common stock Additional paid-in capital Retained earnings, 12/31/21 Total liabilities and equities Gibson Company Keller Company $ (1,050, eee) $ (750, eee) 750, eee 550, see 130, see 80. eee ( (72, eee) @ $ (242,eee) $ (120, eee) $ (1,366, eee) $ (745, eee) (242,eee) (120, eee) 150, eee 50,000 $ (1,458,000) $ (815, eee) $ 194, eee $ 8e, eee 406, see 660, see 640, eee 570,000 1,119, see 220, eee 640, wee 521, mee 550,000 $ 3,100,000 $ 2,500,eee $ (802,00) $ (985, eee) (840,000) (610, eee) (90,000) (1,458,000) (815, eee) $ (3,100,000) $ (2,500,00) (Note: Parentheses Indicate a credit balance.) a. Prepare a worksheet to consolidate the separate 2021 financial statements for Gibson and Keller. b. How would the consolidation entries In requirement (a) have differed if Gibson had sold a building on January 2, 2020, with a $185,000 book value (cost of $390,000) to Keller for $350,000 Instead of land, as the problem reports? Assume that the building had a 10-year remaining life at the date of transfer. Complete this question by entering your answers in the tabs below.

Answer 1

Answer

Required A

Required A Consolidation Worksheet Non Controlling GIBSON AND KELLER Consolidation Worksheet Year Ending December 31, 2021 Consolidation entries Gibson Keller Debit Credit $ (1,050,000.00) $ (750,000.00 $ 450,000.00 $ 750,000.00 $ 550,000.00 $ 31,500.00 $ 474,000.00 $ 130,000.00 $ 80,000.00 $ 17,500.00 $ (72,000.00) $ 72,000.00 (242,000,00) $ (120,000.00) Consolidated Totals $ $ (1,350,000.00) $ 857,500.00 $ 227,500.00 $ (265,000.00 (38,000.00) $ $ 38,000.00 (227,000.00) (1,241,100.00 $(1,366,000,00) 124,900.00 745,000.00 - - $ 20,000.00 $ $ 30,000.00 $ Accounts Revenues Cost of goods sold Other operating expenses Equity in Stark's eanings Net income Consolidated Net Income Net Income attributable to NCI To Gibson Company Retained earnings 1/1/21Gibson Retained earnings 1/1/21-Keller Net income Dividends declared Retained earnings 12/31/21 Cash and Account Receivable Inventory Investment in Keller Trademarks Land Buildings, and equipment (net) Patented technology Total assets Liabilities Common stock Additional paid-in capital Retained earnings 12/31/21 NClin Keller, 1/1 NClin Keller, 12/31 Total liabilities & stockholders' equity $ $ (242,000.00) $ $ 150,000.00 $ $ (1,458,000.00 $ $ 194,000.00 $ 406,000.00 $ $ 640,000.00 $ 1.119.000.00 $ (745,000.00) $ (120,000.00) 50,000.00 (815,000.00 80,000.00 660,000.00 570,000.00 (227,000.00) 150,000.00 (1,318,100.00) 274,000.00 1,026,000.00 1,178,500.00 40,000.00 31,500.00 1,149,000.00 $ $ $ $ 30,000.00 $ $ $ 220,000.00 $ 521,000.00 $ 640,000.00 550,000.00 17,500.00 760,000.00 1,071,000.00 315,000.00 4,624,500.00 (1,747,000.00) (840,000.00) $ 3,100,000.00 $ $ (802,000.00) $ $ $ (840,000.00) $ $ $ (1,458,000.00) $ 100,000.00 $ 332,500.00 $ $ 40,000.00 $ 610,000.00 $ 90,000.00 $ $ 701,400.00 $ (701,400.00) $ $ (719,400.00) $ 2,543,400.00 $ 2,543,400.00 $ 2,500,000.00 (985,000,00) $ (610,000.00) $ (90,000.00) $ (815,000.00) (1,318,100.00) (719,400.00) (4,624,500.00) $ (3,100,000.00) $ (2,500,000.00) $

.

Working -

Transfer Cost(b) Price(a) Gibson Share Non Controlling Deffered Profit Profit (c= a-b) 60% on Intrerest Share 40% at year endd Deffered ="20%) on deffered profit Profit (d'607) (d"40% 280000 120000 24000 14400 9600 292500 157500 12600 572500 277500 555001 33300 Year 2020 Year 2021 400000 450000 31500 18900 22200

.

.

Non Controlling Interest Share in Keller's Income Particular Amount $ $ $ Net income of Keller Add: Deffered unrealizedgain on intra company inventory profit on 2020 Less: Deffered unrealizedgain on intra company inventory profit on 2020 Less: Amortization expense in 2021 Adjusted Net income of Keller in 2021 NCI share in Keller Income (95000*407) 120,000.00 24,000.00 31,500.00 17,500.00 95,000.00 38,000.00 $ Particular Net income of Keller Equity in earnings of Keller Amount 120,000.00 $ 72,000.00 $ Consideration transferred Fair Value of Non Controlling Interest Total Fair Value of Keller Book Value of Keller Fair Value in excess of Book Value 1,050,000.00 700,000.00 1,750,000.00 (1,400,000.00) 350,000.00 $ 350,000.00 20 years Excess Fair Value assigned to: Customer List Life Amortization per year Parent Share's in amortization Non Controlling Interest in amortization $ 17,500.00 = 350000/20 10,500.00 = 17500'60% 7,000.00 = 17500-40% $ $ Unamortized Value of Customer List as on 1/1/2021 Customer List as on 1/1/2020 Less: Amortization during the year 2020 Unamortized Value of Customer List as on 1/1/2021 $ 350,000.00 (17,500.00) 332,500.00 Profit on Sale of Land Year 2020 Book Value of Land Sold Sale price to Keller Gain to Gibson 80,000.00 180,000.00 100,000.00 $ = 180000-80000

Adjustment Debit Credit Cost of Goods Sold: $ 31,500.00 $ $ $ 24,000.00 450,000.00 474,000.00 Adjustment - Cost of Goods Sold $ 31,500.00 Debit Credit Retained Earning 1/1/21 -Gibbson: 100,000.00 24,900.00 $ 124,900.00 Adjustment - Retained Earning 1/1/21 -Gibbson $ Debit Credit Retained Earning 1/1 -Keller: $ 24,000.00 $ 721,000.00 $745,000.00 Adjustment - Retained Earning 1/1 - Keller $ Debit Credit Retained Earning 1/1 -Keller: $ 24,000.00 $ 721,000.00 $745,000.00 Adjustment - Retained Earning 1/1 -Keller $ Debit Credit Investment in Keller: 30,000.00 $ $ 24,900.00 852,600.00 72,000.00 199,500.00 1,149,000.00 Adjustment - Investment in Keller $30,000.00 Debit Credit NCI in Keller 1/1 568,400.00 133,000.00 701,400.00 Adjustment - Retained Earning 1/1 - Keller $ $

.

.

Required B $ Cost of Building Less Book Value of Depreciation Accumulated Depreciation Book Value of Building Transfer Transfer price of Building Gain of Transfer (350000-185000) Life remaining Excess Depreciation Per year (165000/10) Unamortized excess Building at the year 2017 (165000-16500) $ $ $ $ $ 390,000 185,000 205,000 185,000 350,000 165,000 10 years $ $ 16,500 148,500 on Accounts Debit Credit Tra Entry'TA 1) $ 148,500 40,000 $ Retained Earning, 1/1/2018(Gibson) Building (390000-350000) Accumulated Depreciation(205000-16500) (for Eliminating unrealized gain) $ 188,500 ED 2) 16,500 $ 16,500 Accumulated Depreciation Operating expense (For eliminating the excess depreciation charged during the year)