Balance Sheet Eliminations
Bath Corporation acquired 80 percent of Stang Brewing Company's stock on January 1, 20X1, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 20 percent of the book value of Stang Brewing. On January 1, 20X1, Stang Brewing issued $300,000 par value 8 percent, 10-year bonds to Sidney Malt Company. Bath subsequently purchased $100,000 of the bonds from Sidney Malt for $102,000 on January 1, 20X3. Interest is paid semiannually on January 1 and July 1. Assume Bath Corporation uses the fully adjusted equity method. Summarized balance sheets for Bath and Stang as of December 31, 20X4, follow:
BATH CORPORATION Balance Sheet December 31, 20X4 | |||
Cash and Receivables | $122,500 | Accounts Payable | $ 40,000 |
Inventory | 200,000 | Bonds Payable | 400,000 |
Buildings and Equipment (net) | 320,000 | Common Stock | 200,000 |
Investment in Stang Brewing: |
| Retained Earnings | 311,600 |
Bonds | 101,500 |
|
|
Stock | 207,600 |
|
|
Total Assets | $951,600 | Total Liabilities and Owners' Equity | $951,600 |
STANG BREWING COMPANY Balance Sheet December 31, 20X4 | |||
Cash and Receivables | $124,000 | Accounts Payable | $ 28,000 |
Inventory | 150,000 | Bonds Payable | 300,000 |
Buildings and Equipment (net) | 360,000 | Bond Premium | 36,000 |
|
| Common Stock | 100,000 |
|
| Retained Earnings | 170,000 |
Total Assets | $634,000 | Total Liabilities and Owners' Equity | $634,000 |
At December 31, 20X4, Stang holds $42,000 of inventory purchased from Bath, and Bath holds $26,000 of inventory purchased from Stang. Stang and Bath sell at cost plus markups of 30 percent and 40 percent, respectively. Assume total sales from Bath to Stang were $100,000 and from Stang to Bath were $50,000.
Required
a.Prepare all elimination entries needed on December 31, 20X4, to complete a consolidated balance sheet worksheet. Assume Stang earned $75,000 and paid $100,000 in dividends during the year.
b.Prepare a consolidated balance sheet worksheet.
c.Prepare a consolidated balance sheet in good form.
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