Consolidation Worksheet with Differential
Kennelly Corporation acquired all of Short Company’s common shares on January 1, 20X5, for $180,000. On that date, the book value of the net assets reported by Short was $150,000. The entire differential was assigned to depreciable assets with a six-year remaining economic life from January 1, 20X5.
The adjusted trial balances for the two companies on December 31, 20X5, are as follows:
Item | Kennelly Corporation | Short Company | ||
Debit | Credit | Debit | Credit | |
Cash | $ 15,000 |
| $ 5,000 |
|
Accounts Receivable | 30,000 |
| 40,000 |
|
Inventory | 70,000 |
| 60,000 |
|
Depreciable Assets (net) | 325,000 |
| 225,000 |
|
Investment in Short Company Stock | 195,000 |
|
|
|
Depreciation Expense | 25,000 |
| 15,000 |
|
Other Expenses | 105,000 |
| 75,000 |
|
Dividends Declared | 40,000 |
| 10,000 |
|
Accounts Payable |
| $ 50,000 |
| $ 40,000 |
Notes Payable |
| 100,000 |
| 120,000 |
Common Stock |
| 200,000 |
| 100,000 |
Retained Earnings |
| 230,000 |
| 50,000 |
Sales |
| 200,000 |
| 120,000 |
Income from Subsidiary |
| 25,000 |
|
|
| $805,000 | $805,000 | $430,000 | $430,000 |
Kennelly uses the equity-method in accounting for its investment in Short. Short declared and paid dividends on December 31, 20X5.
Required
a.Prepare the eliminating entries needed as of December 31, 20X5, to complete a consolidation worksheet.
b.Prepare a three-part consolidation worksheet as of December 31, 20X5.
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