Chapter 07 – Intercompany Transfers of Noncurrent Assets and Services
P7–35 (continued)
Adjustments to Basic Consolidation Entry:
NCI
Topp Corp.
Net Income
9,000
21,000
– Gain on Equip (Up)
(2,880)
(6,720)
+Extra Depreciation (Up)
360
840
Income to be eliminated
6,480
15,120
———————————————————-—————————
Ending Book Value
67,500
157,500
– Gain on Equip (Up)
(2,880)
(6,720)
+Extra Depreciation (Up)
360
840
Adjusted Book Value
64,980
151,620
108,000
242,000
Basic Consolidation Entry
Common Stock
100,000
← Common Stock
Retained Earnings
100,000
← Beginning balance RE
Income from Morris Co.
15,120
← Topp’s share of NI with Adjustments
NCI in NI of Morris Co.
6,480
← NCI share of NI with Adjustments
Dividends Declared
5,000
← 100% of Morris Co.’s dividends
Investment in Morris Co.
151,620
← Topp’s share of BV with Adjustments
NCI in NA of Morris Co.
64,980
← NCI share of BV with Adjustments
Excess Value (Differential) Calculations:
NCI
30%
+
Topp
Corp.
70%
=
Buildings &
Equipment
+
Copyright
+
Acc.
Depr.
Beginning balance
9,060
21,140
25,000
10,200
(5,000)
Changes
(1,770)
(4,130)
(3,400)
(2,500)
Ending balance
7,290
17,010
25,000
6,800
(7,500)
Amortized Excess Value Reclassification Entry:
Amortization Expense
3,400
Depreciation Expense
2,500
Income from Morris Co.
4,130
NCI in NI of Morris Co.
1,770
Excess Value (Differential) Reclassification Entry:
Buildings & Equipment
25,000
Copyright
6,800
Acc. Depr.
7,500
Investment in Morris Co.
17,010
NCI in NA of Morris Co.
7,290
Eliminate Gain on Purchase of Land
Investment in Morris Co.
11,000
Land
11,000
Chapter 07 – Intercompany Transfers of Noncurrent Assets and Services
Excess Value (Differential) Reclassification Entry:
Land
56,000
Goodwill
64,000
Investment in Schmid Dist.
90,000
NCI in NA of Schmid Dist.
30,000
Eliminate Services
Other Income
80,000
Other Expenses
80,000
Eliminate Intercompany Payables/Receivables
Current Payables
20,000
Current Receivables
20,000
Eliminate Intercompany Dividend Owed
Current Payables
3,750
Current Receivables
3,750
Eliminate Gain on Purchase of Land
Investment in Schmid Dist.
23,000
Land
23,000
Equipment
Accumulated
Depreciation
Actual (Rossman Corp.):
250,000
25,000
145,000
185,000
4,000
“As if” (Schmid Dist.):
435,000
174,000
Eliminate the Loss on Equipment and Correct Asset’s Basis:
Equipment
185,000
Loss on Sale
40,000
Accumulated Depreciation
145,000
Depreciation Expense
4,000
Accumulated Depreciation
4,000
Investment in
Income from
Schmid Dist.
Schmid Dist.
Beginning Balance
2,879,500
75% Net Income
82,500
82,500
75% Net Income
15,000
75% Dividends
Def. Loss on
Equipment
30,000
3,000
Realize Loss
3,000
30,000
Def. Loss on
Equipment
Ending Balance
2,974,000
109,500
Ending Balance
2,907,000
Basic
109,500
Def. Gain on Land
23,000
90,000
Excess Reclass.
0
0
P7-38 (continued)