Question

Giant acquired all of Small’s common stock on January 1, 2014, in exchange for cash of $770,000. On that day, Small reported common stock of $170,000 and retained earnings of $400,000. At the acquisition date, $77,500 of the fair-value price was attributed to undervalued land while $53,000 was assigned to undervalued equipment having a 10-year remaining life. The $69,500 unallocated portion of the acquisition-date excess fair value over book value was viewed as goodwill. Over the next few years, Giant applied the equity method to the recording of this investment.

Following are individual financial statements for the year ending December 31, 2018. On that date, Small owes Giant $18,900. Small declared and paid dividends in the same period. Credits are indicated by parentheses.

	Giant				Small
Revenues	$	(1,228,300	)		$	(450,500	)
Cost of goods sold		555,000				91,500
Depreciation expense		214,000				174,000
Equity in income of Small		(179,700	)			0
Net income	$	(639,000	)		$	(185,000	)
Retained earnings, 1/1/18	$	(1,890,000	)		$	(644,000	)
Net income (above)		(639,000	)			(185,000	)
Dividends declared		320,000				120,000
Retained earnings, 12/31/18	$	(2,209,000	)		$	(709,000	)
Current assets	$	746,500			$	177,000
Investment in Small		1,052,500				0
Land		505,000				238,000
Buildings (net)		329,000				500,000
Equipment (net)		678,000				342,000
Goodwill		0				0
Total assets	$	3,311,000			$	1,257,000
Liabilities	$	(852,000	)		$	(378,000	)
Common stock		(250,000	)			(170,000	)
Retained earnings(above)		(2,209,000	)			(709,000	)
Total liabilities and equities	$	(3,311,000	)		$	(1,257,000	)

1. Prepare a consolidation worksheet for Giant and Small for the year ending December 31, 2018

GIANT COMPANY AND SMALL COMPANY Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entries Consolidated Accounts Giant Small Debit Credit Totals S $ (450,500) Revenues (1,678,800) (1,228,300) 555,000 Cost of goods sold 91,500 646,500 174,000 Depreciation expense 214,000 5,300 393,300 (179,700) Equity income of Small 179,700 $ (639,000) S (185,000) (639,000) Net income $ (644,000) Retained earnings 1/1 (1,890,000) 644,000 (1,890,000) (639,000) Net income (above) (185,000) (639,000) 320,000 Dividends declared 320,000 120,000 120,000 Retained earnings $ (2,209,000) $ (709,000) (2,209,000) 12/31 746,500 904,600 Current assets S S 177,000 18,900 1,052,500 120,000 Investment in Small Land 505,000 238,000 102,500 850,500 Buildings (net) Equipment (net) 329,000 500,000 829,000 678,000 (26,500) 342,000 53,000 1,046,500 Goodwill 0 69,500 69,500 $3,311,000 $ 1,257,000 $ 3,700,100 Total assets $ (852,000) $ (378,000) Liabilities 18,900 (1,211,100) Common stock Retained earnings (above) Total liabilities and (250,000) (170,000) 170,000 (250,000) (2,209,000) (709,000) (2,209,000) $ (3,670,100) (3,311,000) 311,900 1,163,400 equity (1,257,000)

Answer 1

Kindly make the following corrections

	Giant	Small	Debit	Credit	Consolidated totals
Current assets	746500	177000		18900	904600
Investment in Small	1052500	0	120000	1172500	0
Land	505000	238000	77500		820500
Buildings (net)	329000	500000			829000
Equipment (net)	678000	342000	31800	5300	1046500
Goodwill			69500		69500
Total assets	3311000	1257000			3670100

(53000/10*6) = 31800

53000/10 = 5300

1052500+120000 = 1172500