Following are the individual financial statements for Gibson and Davis for the year ending December 31, 2024: Account Gibson Davis Sales $ (731,000) $ (444,000) Cost of goods sold 334,000 197,000 Operating expenses 256,000 67,000 Dividend income (12,000) 0 Net income $ (153,000) $ (180,000)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Following are the individual financial statements for Gibson and Davis for the year ending December 31, 2024:

Account Gibson Davis
Sales $ (731,000) $ (444,000)
Cost of goods sold 334,000 197,000
Operating expenses 256,000 67,000
Dividend income (12,000) 0
Net income $ (153,000) $ (180,000)
Retained earnings, 1/1/24 $ (711,000) $ (487,000)
Net income (153,000) (180,000)
Dividends declared 60,000 20,000
Retained earnings, 12/31/24 $ (804,000) $ (647,000)
Cash and receivables $ 120,000 $ 230,000
Inventory 521,000 251,000
Investment in Davis 603,000 0
Buildings (net) 590,000 614,000
Equipment (net) 410,000 444,000
Total assets $ 2,244,000 $ 1,539,000
Liabilities $ (810,000) $ (552,000)
Common stock (630,000) (340,000)
Retained earnings, 12/31/24 (804,000) (647,000)
Total liabilities and stockholders' equity $ (2,244,000) $ (1,539,000)

Gibson acquired 60 percent of Davis on April 1, 2024, for $603,000. On that date, equipment owned by Davis (with a five-year remaining life) was overvalued by $39,000. Also on that date, the fair value of the 40 percent noncontrolling interest was $402,000. Davis earned income evenly during the year but declared the $20,000 dividend on November 1, 2024.

Required:

  1. Prepare a consolidated income statement for the year ending December 31, 2024.

  2. Determine the consolidated balance for each of the following accounts as of December 31, 2024:

  • Goodwill
  • Equipment (net)
  • Common stock
  • Buildings (net)
  • Dividends declared
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