Problem

Balance Sheet Consolidation of Majority-Owned SubsidiaryOn January 2, 20X8, Total Corporat...

Balance Sheet Consolidation of Majority-Owned Subsidiary

On January 2, 20X8, Total Corporation acquired 75 percent of Ticken Tie Company’s outstanding common stock. In exchange for Ticken Tie’s stock, Total issued bonds payable with a par value of $500,000 and fair value of $510,000 directly to the selling stockholders of Ticken Tie. At that date, the fair value of the noncontrolling interest was $170,000. The two companies continued to operate as separate entities subsequent to the combination.

Immediately prior to the combination, the book values and fair values of the companies’ assets and liabilities were as follows:

 

Total

Ticken Tie

Book Value

Fair Value

Book Value

Fair Value

Cash

$ 12,000

$ 12,000

$ 9,000

$ 9,000

Receivables

41,000

39,000

31,000

30,000

Allowance for Bad Debts

(2,000)

 

(1,000)

 

Inventory

86,000

89,000

68,000

72,000

Land

55,000

200,000

50,000

70,000

Buildings and Equipment

960,000

650,000

670,000

500,000

Accumulated Depreciation

(411,000)

 

(220,000)

 

Patent

 

 

 

40,000

Total Assets

$741,000

$990,000

$607,000

$721,000

Current Payables

$ 38,000

$ 38,000

$ 29,000

$ 29,000

Bonds Payable

200,000

210,000

100,000

100,000

Common Stock

300,000

 

200,000

 

Additional Paid-in Capital

100,000

 

130,000

 

Retained Earnings

103,000

 

148,000

 

Total Liabilities and Equity

$741,000

 

$607,000

 

At the date of combination, Ticken Tie owed Total $6,000 plus accrued interest of $500 on a short-term note. Both companies have properly recorded these amounts.

Required

a. Record the business combination on the books of Total Corporation.


b. Present in general journal form all elimination entries needed in a worksheet to prepare a consolidated balance sheet immediately following the business combination on January 2, 20X8.


c. Prepare and complete a consolidated balance sheet worksheet as of January 2, 20X8, immediately following the business combination.


d. Present a consolidated balance sheet for Total and its subsidiary as of January 2, 20X8.

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