Elimination Entries for Intercompany Transfers
Grand Delivery Service acquired at book value 80 percent of the voting shares of Acme Real Estate Company. On that date, the fair value of the non controlling interest was equal to 20 percent of Acme’s book value. Acme Real Estate reported common stock of $300,000 and retained earnings of $100,000. During 20X3 Grand Delivery provided courier services for Acme Real Estate in the amount of $15,000. Also during 20X3, Acme Real Estate purchased land for $1,000. It sold the land to Grand Delivery Service for $26,000 so that Grand Delivery could build a new transportation center. Grand Delivery reported $65,000 of operating income from its delivery operations in 20X3. Acme Real Estate reported net income of $40,000 and paid dividends of $10,000 in 20X3.
Required
a.Compute consolidated net income for 20X3.
b.Give all journal entries recorded by Grand Delivery Service related to its investment in Acme Real Estate assuming Grand uses the basic equity method in accounting for the investment.
c.Give all eliminating entries required in preparing a consolidation worksheet as of December 31,20X3.
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