35. (60 Minutes) (Consolidation worksheet for combination with upstream inventory
transfers and downstream transfer of land. Also asks about transfer of a building.
Parent uses partial equity method.)
Consideration transferred …………….……..….…. $570,000
Noncontrolling interest fair value…………………. 380 ,000
to customer list………………………………..….…. 100 ,000
20 yrs…..…..…..………………………………$5,000
-0-
a. CONSOLIDATION ENTRIES
Entry *TL
Entry *G
Retained earnings, 1/1/15 (Keller) ……………… 10,000
Entry *C
Retained earnings, 1/1/15 (Gibson) ..….......... 9,000
Investment in Keller ………….…………….…... 9,000
Parent is applying the partial equity method as can be seen by the amount
in the Equity in earnings of Keller Company account (60 percent of the
reported balance). Thus, the parent’s share of amortization of $3,000
35. (continued)
Entry S
Common stock (Keller) ……………….…..….….... 320,000
Additional paid-in capital ……………….…………. 90,000
Entry A
Customer list……….……………….…………………… 95,000
Entry I
Equity in earnings of Keller …………………….… 84,000
Investment in Keller ………….…………….…... 84,000
To eliminate intra-entity income accrual.
Entry P
Liabilities………………………….…………….…..….… 40,000
Accounts receivable ………….……….…..…... 40,000
To eliminate intra-entity debt.
Entry Tl
35. (continued)
Entry G
Cost of goods sold ……………..…………….….….. 12,000
Net income attributable to noncontrolling interest
Keller reported net income …………..…………………..….…..….….... $140,000
Excess fair value amortization ……………..………….….…..….…..… (5,000)
35. a. (continued) GIBSON AND KELLER
Consolidation Worksheet
Year Ending December 31, 2015
Consolidation Entries Noncontrolling Consolidated
Accounts Gibson Keller Debit Credit Interest Totals
Sales (800,000) (500,000) (TI) 200,000 (1,100,000)
Cost of goods sold 500,000 300,000 (G) 12,000 (*G) 10,000 602,000
(TI) 200,000
Operating expenses 100,000 60,000 (E) 5,000 165,000
RE, 1/1—Keller (620,000) (*G) 10,000
(S) 610,000
Net income (above) (284,000) (140,000) (279,800)
Dividends declared 115 ,000 60 ,000 (D) 36,000 24,000 115 ,000
Retained earnings, 12/31 (1 ,285,000) (700 ,000) (1 ,231,800)
Cash 177,000 90,000 267,000
Accounts receivable 356,000 410,000 (P) 40,000 726,000
Inventory 440,000 320,000 (G) 12,000 748,000
Investment in Keller 726,000 (D) 36,000 (*C) 9,000 -0-
Customer list -0- -0- (A) 95,000 (E) 5,000 90 ,000
Total assets 2 ,375,000 1 ,510,000 3 ,157,000
Liabilities (480,000) (400,000) (P) 40,000 (840,000)
Common stock (610,000) (320,000) (S) 320,000 (610,000)
Additional paid-in capital (90,000) (S) 90,000
35. (continued)
b. If the intra-entity transfer had been a building rather than land, two
adjustments to the consolidation entries would be needed. Entry *TL
Entry *TA
Retained earnings, 1/1/15 (Gibson) ..….......... 36,000
To defer unrealized gain ($40,000 original amount less one year of
excess depreciation at $4,000 per year) as of beginning of year. Entry
also returns Buildings account to historical cost (from $100,000 to
$140,000) and Accumulated Depreciation account to historical cost
(original $80,000 less one year of excess depreciation at $4,000).
Because the Buildings account is shown at net value in the
information given in this problem, the above entry would probably be
made as follows:
Entry *TA (Alternative)
Retained earnings, 1/1/15 (Gibson) ..….......... 36,000
Buildings (net) …………..……………………..…. 36,000
Entry ED
To remove excess depreciation for current year created by transfer
36. (40 Minutes) (Prepare consolidation worksheet with intra-entity transfer of
inventory and land. No outside ownership exists)
a. Skyline reported net income……………..………….….…..….…..…... $(88,000)
Patented technology amortization……………….…………………….. 15,000
b. Acquisition-Date Fair Value Allocation
Consideration transferred (fair value of shares issued) ........ $450,000
Book value of subsidiary …………………………………….….…..….… 300 ,000
Fair value in excess of book value ………………….…..….…..….… $150,000
Excess fair over book value assigned to:
Unrealized Upstream Inventory Gross Profit, 1/1
Inventory being held ($50,000 × 72%) ……….……………………….. $36,000
Gross profit rate ($20,000 ÷ $50,000) …………………………..…..… 40%
Unrealized gross profit, 1/1 ……………………….….…..….…..….….. $14 ,400
Unrealized Upstream Inventory Gross Profit, 12/31
CONSOLIDATION ENTRIES
Entry *G
computed above.
Entry S
Common stock (Skyline) …………..……………..….... 120,000
Additional paid-in capital (Skyline) ………..…..….. 30,000
36. (continued)
Entry A
Trademarks ……………..……………….…………….….…. 30,000
Patented technology …………..……………….………… 105,000
Entry I
Investment income …………..……….…..….…..….….. 55,400
Investment in Skyline ……………………………….. 55,400
To remove intra-entity income accrued by parent using the equity
method.
Entry D
Entry Tl
Revenues ………..……………….……………..…..….….… 80,000
Cost of goods sold ……………..…………….….….. 80,000
To eliminate intra-entity inventory transfer for current year.
Entry G
Entry TL
Gain on sale of land …………………………….………... 18,000
Land ……………………………………………….…..…... 18,000
To remove gain from intra-entity transfer of land during current year.
Entry P
36. (continued) PARKWAY AND SKYLINE
Consolidation Worksheet
Year Ending December 31, 2015
Consolidation Entries Consolidated
Accounts Parkway Skyline Debit Credit Totals
Investment income (55 ,400) (I) 55,400 -0-
Net income (241 ,400) (88 ,000) (241 ,400)
Retained earnings 1/1 (314,600) (292,000) (*G) 14,400 (314,600)
(S) 277,600 -0-
(A) 135,000 -0-
(I) 55,400
Trademarks 50,000 (A) 30,000 80,000
Patented technology 130,000 (A) 105,000 (E) 15,000 220,000
Land, buildings, and equipment (net) 637 ,000 283 ,000 (TL) 18,000 902 ,000
Total liabilities & stockholders’ equity (1 ,650,000) (725 ,000) 844 ,400 844 ,400 (1 ,800,000)
Chapter 5 Excel Case Solution
Excel Case Equity in Shawn Co. Earnings
2014 78,000
Fair Value Allocation Schedule 1/1/2014El profit (34,200)
Consideration transferred 1,000,000 Amortization (12 ,600)
C.S. 500,000 Equity earnings 31 ,200
Inventory El profit (37,800)
Shawn sells GPR remaining Amortization (12 ,600)
to Patrick 60% 30% Equity earnings 68 ,800
Intra-entity Inventory Transfers (upstream) Shawn Co. dividends
Sales Inventory Intra. profit 2014 25,000
Consolidation Adjustments
Investment account *G RE-Shawn 34,200
Cost 1,000,000
COGS 34,200
2014 Equity earnings 31,200
dividends (25 ,000)
2015 Equity earnings 68,800
dividends (27 ,000)
A Tradename 302,400
12/31/15 1 ,048,000
Investment in Shawn 302,400
27,000
E Amortization expense 12,600
Tradename
12,600
IT Sales 210,000
COGS
Analysis and Research—Accounting Information and Salary Negotiations
a. With common control over related enterprises, a consolidated income statement better
portrays economic reality. For example, it is likely that the Stadium’s concession and parking
Searching the FASB ASC for “separate statements” and then “intra-entity” yields the following
relevant support:
There is a presumption that consolidated financial statements are more meaningful than
As consolidated financial statements are based on the assumption that they represent the
Granger Eagles Team and Stadium
Consolidated Income Statement
Ticket revenues $2,000,000
Concession revenue 800,000
COGS 250,000
Depreciation 80,000
b. Other pertinent factors include
Any available comparisons for the market values for the players