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
icon
Related questions
icon
Concept explainers
Question

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
Expert Solution
steps

Step by step

Solved in 4 steps with 4 images

Blurred answer
Knowledge Booster
Completing the Accounting Cycle
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education