Problem

On January 1, 2011, Alpha acquired 80 percent of Delta. Of Delta’s total business fair val...

On January 1, 2011, Alpha acquired 80 percent of Delta. Of Delta’s total business fair value, $125,000 was allocated to copyrights with a 20-year remaining life. Subsequently, on January 1, 2012, Delta obtained 70 percent of Omega’s outstanding voting shares. In this second acquisition, $120,000 of Omega’s total business fair value was assigned to copyrights that had a remaining life of 12 years. Delta’s book value was $490,000 on January 1, 2011, and Omega reported a book value of $140,000 on January 1,2012.

Delta has made numerous inventory transfers to Alpha since the business combination was formed. Unrealized gross profits of $15,000 were present in Alpha’s inventory as of January 1, 2013. During the year, $200,000 in additional intra-entity sales were made with $22,000 in gross profits remaining unrealized at the end of the period.

Both Alpha and Delta utilized the partial equity method to account for their investment balances.

Following are the individual financial statements for the companies for 2013 with consolidated totals. Develop the worksheet entries necessary to derive these reported balances:

 

Alpha Company

Delta Company

Omega Company

Consolidated Totals

Sales

$ (900,000)

$ (500,000)

$(200,000)

 $(1,400,000)

Cost of goods sold

500,000

240,000

80,000

 627,000

Operating expenses

; 294,000

129,000

50,000

489,250

Income of subsidiary

. (144,000)

(49,000)

-0-

-0-

 Separated company net income

$ (250,000)

$ (180,000)

$ (70,000)

 

Consolidated net income

 

 

 

$(283,750)

Noncontrolling interest in income of Delta Company

 

 

 

31,950

Noncontrolling interest in income of Omega Company

 

 

 

18,000

 Controlling interest in consolidated net income

 

 

 

$(233,800)

Retained earnings, 1/1/13

$(600,000)

$(400,000)

$(100,000)

$(572.400)

Net income (above)

(250,000)

(180,000)

(70,000)

(233,800)

Dividends paid 50,000

50,000

40,000

50,000

50,000

Retained earnings, 12/31/13

$(800,000)

$(540,000)

$(120,000)

$(756,200)

Cash and receivables

$262,000

$206,000

$70,000

$538,000

Inventory

290,000

310,000

160,000

738,000

Investment in Delta Company

628,000

-0-

-0-

-0-

Investment in Omega Company

-0-

238,000

-0-

-0-

Property, plant, and equipment

420,000

316,000

270,000

1,006,000

Copyrights

-0-

-0-

-0-

206,250

 Total assets

$ 1,600,000

$1,070,000

$500,000

$2,488,250

Liabilities

$(600,000)

$(410,000)

$(280,000)

$(1,290,000)

Common stock

(200,000)

(120,000)

(100,000)

(200,000)

Retained earnings, 12/31/13

(800,000)

(540,000)

(120,000)

(756,200)

Noncontrolling interest in Delta Company, 12/31/13

-0-

-0-

-0-

(146,050)

Noncontrolling interest in Omega Company, 12/31/13

-0-

-0-

-0-

(96,000)

 Total liabilities and equities

$(1,600,000)

$(1,070,000)

$(500,000)

$(2,488,250)

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