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2. Following are selected accounts for Mergaronite Company and Hill, Inc., as of December 31, 2018. Several of Mergaronites
Assume that Mergaronite took over Hill on January 1, 2014, by issuing 7,000 shares of common stock having a par value of S10
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(A). Workings to determine the consolidated totals as on December 31 2018

Revenues

Particulars Amount
Revenues of Mergaronite $ 6,00,000
Revenues of Hill $2,50,000
Total $8,50,000

Amortization Expense

Particulars Amount
Amortization Expense for 2018 ($ 100,000/20 = $ 5,000) $5,000
Total $5,000

Building

Particulars Amount
Building of Mergaronite $5,00,000
Building of Hill $1,40,000
Over Valuation of Building $30,000
Total $6,70,000

Depreciation Expense

Particulars Amount
Depreciation Expense of Mergaronite $1,20,000
Depreciation Expense of Hill $50,000
Depreciation on the over Valuation of Building $3,000
Depreciation on undervalued Equuipment $12,000
Total $1,85,000

Additional paid in capital

Particular Amount
Additional paid in capital of Mergaronite $50,000
Total $50,000

Note: Here we consider the additional paid in capital of parent company only. Because the Mergaronite tool over hill by issuing additional paid in capital in Mergaronite company.

Patent

Particulars Amount
Patent value as on 2014 $1,00,000
Less : Amortization 2018 $5,000
Less : Amortization for 4 years $20,000
Total $75,000

Customer list development by Hill Inc, is consider as patent each year Amortization expense is ($100,000 /20) Amortization expense for ( 2014 , 2015,2016,2017) Value of customer list as on 31st December 2018.

Cost of Goods sold

Particulars Amount
Cost of Goods sold of Mergaronite $2,80,000
Cost of Goods sold of Hill $1,00,000
Total $3,80,000

Common Stock

Particulars Amount
Common Stock of Mergaronite $3,00,000
Total $3,00,000

Note: Here we consider the common stock of parent company only. Because the Mergaronite took over hill by issuing common stock in Mergaronite company.

Equipment

Particulars Amount
Equipment of Mergaronite $2,00,000
Equipment of Hill $2,50,000
Total $4,50,000

Equipment that was undervalued by $60,000 need not do any adjustment. Equipment was undervalued on January 2014 and by the end of 2018 the 5 years period is completed

(B). Here we are not dealing with the parent's company investment account and there are no relprocity entries required to be posted. No adjustment are to be made on earnings on equity and dividends. Hence the method used by the parent company does not matters.

(C). Consolidation entries if parent company is using equity method

Elimination entry passed to Eliminate investment A/C in Subsidiary

Particulars Amount Amount
Retained Earnings A/C $6,00,000
Common Stock $40,000
Additional Paid in capital $1,60,000
To Investment $8,00,000
Land $20,000
Equipment $12,000
Customer list $80,000
To Building net A/C $18,000
To Investment in HIll A/C $94,000
Investment in Hill $40,000
To Dividend Paid $40,000
Depreciation A/c $12,000
Amortization A/c $5,000
Building $3,000
To Equipment A/c $12,000
To Customer A/c $5,000
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