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8–35 Ch. 8—Problems
Problem 8-6, Continued
Mary Company and Subsidiaries John Company and Joan Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2018
(Concluded)
Consoli-
Eliminations Consolidated Controlling dated
Trial Balance
and Adjustments Income Retained Balance
Mary John Joan Dr. Cr. Statement NCI Earnings Sheet
Consolidated Net Income .................................................................................................................................................... (185,500) ............. ............. ...............
To NCI (John and Joan) (see distribution schedule) ...................................................................................................... 29,000 (29,000) ............. ...............
Eliminations and Adjustments:
(CY1) Eliminate current-year entries for Mary’s investment in John. Income: $70,000 × 60% = $42,000.
(EL1) Eliminate Mary’s interest in John’s equity.
(CY3) Eliminate current-year entries for John’s investment in Joan, $40,000 × 50% = $20,000.
(EL3) Eliminate John’s interest in Joan’s equity.
(F2) Adjust depreciation on the machine for 2018.
(IS) Eliminate intercompany sale of goods from John to Joan.
Problem 8-6, Concluded
Subsidiary Joan Company Income Distribution
Gain on sale of machine ............... $10,000 Internally generated net
income ................................ $40,000
Gain on machine realized
through use ......................... 2,000
Adjusted income ....................... $32,000
NCI share ................................. × 10%
NCI ........................................... $ 3,200
Subsidiary John Company Income Distribution
Gross profit in ending Internally generated net
inventory .................................. $1,500 income ................................ $50,000
50% × Joan adjusted
income of $32,000 .............. 16,000
8–37 Ch. 8—Problems
PROBLEM 8-7
Shelby investment in Borner Company on January 1, 2015:
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Adjustment of identifiable accounts:
Worksheet Amortization
Adjustment Key Life per Year
Plant assets ......................................... $ 50,000 debit D3 10 $5,000
DeNoma Company investment in Shelby Corporation on January 1, 2017:
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (60%) (40%)
Fair value of subsidiary ........................ $1,250,000 $ 750,000 $ 500,000
Less book value of interest acquired:
Common stock ............................... $ 500,000
Paid-in capital in excess of par ...... 150,000
Adjustment of identifiable accounts:
Worksheet Amortization
Adjustment Key Life per Year
Problem 8-7, Continued
DeNoma Company and Subsidiaries Shelby Corporation and Borner Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2018
Consoli-
Eliminations Consolidated Controlling dated
Trial Balance
and Adjustments Income Retained Balance
DeNoma Shelby Borner Dr. Cr. Statement NCI Earnings Sheet
Inventory ......................................... 75,000 60,000 40,000 ............... (EI) 8,000 ................. ............. ............. 167,000
Other Current Assets ...................... 900,000 2,000 390,000 ............... ................ ................. ............. ............. 1,292,000
................. ................. ................. ................ (A3) 11,000 ................. ............. ............. ...............
................. ................. ................. ................ (A1) 10,000 ................. ............. ............. ...............
Investment in Shelby Corporation ... 894,000 ................. ................. ................ (CY1) 72,000 ................. ............. ............. ...............
................. ................. ................. ................ (EL1) 756,600 ................. ............. ............. ...............
................. ................. ................. (BI) 3,240 ................ ................. ............. ............. ...............
Common Stock—Shelby ................. ................. (500,000) ................. (EL1) 300,000 ................ ................. (200,000) ............. ...............
Paid-In Capital in Excess of
Par—Shelby ............................... ................. (150,000) ................. (EL1) 90,000 ................ ................. (60,000) ............. ...............
Problem 8-7, Continued
DeNoma Company and Subsidiaries Shelby Corporation and Borner Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2018
(Concluded)
Consoli-
Eliminations Consolidated Controlling dated
Trial Balance
and Adjustments Income Retained Balance
DeNoma Shelby Borner Dr. Cr. Statement NCI Earnings Sheet
Retained Earnings—Borner ............ ................. ................. (500,000) (EL2) 450,000 (NCI2) 9,000 ................. (56,900) ............. ...............
................. ................. ................. (A3) 1,500 ................ ................. ............. ............. ...............
................. ................. ................. (BI) 600 ................ ................. ............. ............. ...............
Sales ............................................... (900,000) (700,000) (600,000) (IS) 125,000 ................ (2,075,000) ............. ............. ...............
Problem 8-7, Continued
Eliminations and Adjustments:
(Adj) Adjust Investment in Borner Company and Retained Earnings—Shelby for
(A1) Amortize the excess for the current and past years:
Depreciation: Current Prior Total
(A3) Amortize excess as follows:
Borner retained earnings, 3 years × 10% × $5,000 ..... $1,500
Shelby retained earnings, 1 year (2 years are in the
adjustment), 90% × $5,000 .................................... 4,500
Expense ....................................................................... 5,000
(IS) Eliminate the current-year intercompany merchandise sale.
(BI) Eliminate Borner’s gross profit contained in Shelby’s beginning inventory. The
correction of retained earnings must be prorated between noncontrolling and
controlling interests:
$7,500 × 80% = $6,000
(EI) Eliminate the intercompany profit contained in Shelby’s ending inventory,
$10,000 × 80% = $8,000.
(F1) Adjust to remove gain on intercompany sale of assets, reduce accumulated
depreciation by the prior-year amortization of the gain, and reduce Shelby’s
Problem 8-7, Concluded
Subsidiary Borner Company Income Distribution
Ending inventory profit .................. $8,000 Internally generated
Depreciation on excess ................. 5,000 income ................................ $50,000
Beginning inventory profit ......... 6,000
Subsidiary Shelby Corporation Income Distribution
Depreciation on excess ................. $5,000 Internally generated
income ................................ $ 75,000
Share of Borner income
(90% × $43,000) ................. 38,700
Parent DeNoma Company Income Distribution
Internally generated
PROBLEM 8-8
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (80%) (20%)
Fair value of subsidiary ........................ $562,500 $450,000 $112,500
Less book value of interest acquired:
Common stock ($10 par) ................ $ 50,000
Adjustment of identifiable accounts:
Worksheet Amortization
Adjustment Key Life per Year
8–43 Ch. 8—Problems
Problem 8-8, Continued
Parson Company and Subsidiary Salary Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2016
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Parson Salary Dr. Cr. Statement NCI Earnings Sheet
Inventory ........................................................ 170,000 120,000 ................. (EI) 4,800 ................. ................. ................. 285,200
Long-Term Liabilities ...................................... (250,000) (100,000) ................. ................. ................. ................. ................. (350,000)
Common Stock ($10 par)—Parson ................ (100,000) ................. ................. ................. ................. ................. ................. (100,000)
Dividends Declared—Salary .......................... ................. 10,000 ................. (CY1) 8,000 ................. 2,000 ................. .................
Treasury Stock ............................................... .................
................. (TS) 100,000 ................. ................. ................. ................. 100,000
Totals .......................................................... 0 0 707,300 .... 707,300 ................. ................. .................
Consolidated Net Income ........................................................................................................................................ (175,200) ................. ................. .................
Problem 8-8, Concluded
Eliminations and Adjustments:
(CV) Convert to the simple equity method as of January 1, 2016.
(CY1) Eliminate the current-year dividend income of Parson against dividends declared
by Salary.
(EL) Eliminate 80% of the Salary Company equity balances at the beginning of the
year against the investment account.
(D) Distribute the $122,000 excess of cost over book value and $30,500 NCI ad-
justment to goodwill.
Subsidiary Salary Company Income Distribution
Internally generated net
income ................................ $60,000
NCI share ................................. × 20%
NCI ........................................... $12,000
Parent Parson Company Income Distribution
Ending inventory profit .................. $4,800 Internally generated net
PROBLEM 8-9
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (75%) (25%)
Fair value of subsidiary ........................ $148,000 $111,000* $ 37,000
Less book value of interest acquired:
Common stock ($5 par) .................. $ 20,000
Adjustment of identifiable accounts:
Worksheet Amortization
Adjustment Key Life per Year
Goodwill ............................................... $ 6,000 debit D
*Last purchase at $51,800/1,400 shares = $37 per share. Fair value = 3,000 shares × $37 =
$111,000
Adjustment to fair value:
Problem 8-9, Continued
Heckert Company and Subsidiary Aker Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2017
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Heckert Aker Dr. Cr. Statement NCI Earnings Sheet
Cash ............................................................... 38,100 29,050 ................. ................. ................. ................. ................. 67,150
Marketable Securities ..................................... 33,000 18,000 ................. (TS) 18,000 ................. ................. ................. 33,000
................. ................. ................. (D) 4,500 ................. ................. ................. .................
Patents ........................................................... 35,000 ................. ................. ................. ................. ................. ................. 35,000
Goodwill ......................................................... ................. ................. (D) 6,000 ................. ................. ................. ................. 6,000
Dividends Declared—Aker ............................. ................. 4,000 ................. (CY1) 3,000 ................. 1,000 ................. .................
Sales and Services ........................................ (850,000) (530,000) (IS) 182,000 ................. (1,198,000) ................. ................. .................
Dividend Income ............................................ (3,000) ................. (CY1) 3,000 ................. ................. ................. ................. .................
Other Income ................................................. (9,000) (3,700) (F1) 800 ................. (11,900) ................. ................. .................
8–47 Ch. 8—Problems
Problem 8-9, Continued
Heckert Company and Subsidiary Aker Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2017
(Concluded)
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Heckert Aker Dr. Cr. Statement NCI Earnings Sheet
Gain on investment ........................................ ................. ................. ................. (Adj) 11,200 (11,200) ................. ................. .................
Eliminations and Adjustments:
(Adj) Adjust investment account for gain on prior investment, $11,200.
(CY1) Eliminate intercompany cash dividends.
(CY2) Eliminate intercompany dividends on shares of Heckert owned by Aker,
1,500 × $0.50 = $750 against the dividends payable account.
(EL) Eliminate 75% of subsidiary equity against the investment account.
Problem 8-9, Concluded
Subsidiary Aker Company Income Distribution
Gain on sale of equipment ............ $ 800 Internally generated net
Unrealized profit in income ................................ $ 38,000
ending inventory ...................... 5,400 Gain on investment in Heckert . 11,200
Parent Heckert Company Income Distribution
Internally generated net
