GOMEZ COMPANY AND CONSOLIDATED SUBSIDIARIES Consolidation Worksheet December 31, 2024 Consolidation Entries Gomez Accounts Company Martin Company Short Company Debit Credit Noncontrolling Consolidated Interest Balance Sales (1,008,000) (627,000) (560,000) Operating expenses Cost of goods sold Equity eamings of Martin 537,600 334,400 280,000 112,006 152,200 168,000 (191,880) Equity eamings of Short (80,200) Separate company net income (550,274) (220,600) (112,000) Consolidated net income Net income attributable to Noncontrolling interest (Short) Net income attributable to Noncontrolling interest (Martin) Net income attributable to Gomez Company Retained earnings-Gomez 1/1 Retained earnings-Martin 1/1 Retained earnings-Short 1/1 Net income Dividends declared Retained earnings, 12/31 Cash and receivables Inventory 966,274 714,680 330,000 560,274 220,600 112,000 131,000 (1.385,548) (935,280) (442,000) 121,500 105,680 94,000 115,000 213,000 198,000 Investment in Martin Company 1,179,324 Investment in Short Company 517,160 Land, buildings, & equipment (not) 836,112 757,840 574,000 Copyright License agreements Total assets Labies Common stock Retained eamings, 12/31 (above) Noncontrolling interest Short, 1/1 Noncontrolling interest in Martin, 1/1 Noncontrolling interests total 12/31 Totallables and equities 2,281,324 1,583,680 866,000 (383,776) (352,400) (212,000) (512,000) (306,000) (212,000) 1,385.548 935,280 442,000 (2.281,324) (1.503,680) (866,000) 이 0 0 Prepare schedules that show the calculations of the Investment in Short 12/31/24 account balances. Prepare schedules that show the calculations of the Investment in Martin 12/31/24 account balances. Consideration transferred by Martin for Short Short's separate 2023 net income Excess copyright amortization 2023 intra-entity Ending Inventory profit deferral Short's adjusted 2023 net income Percentage owned by Martin Short's separate 2024 income $ 124,800 Consideration transferred by Gomez for Martin Martin's separate 2023 net income Martin's share of Short's 2023 net income Martin's 2023 net income Excess licensing agreement amortization Martin's adjusted 2023 net income Percentage owned by Gomez 90% Excess copyright amortization Intra-entity Beginning Inventory profit recognition Intra-entity Ending Inventory profit deferral Short's adjusted 2024 net income Percentage owned by Martin Investment in Short 12/31/24 80% Equity in earnings of Martin 2023 Martin's 2024 net income Excess licensing agreement amortization Martin's adjusted 2024 net income Percentage owned by Gomez 80% Equity in earnings of Martin 2024 0 90%

GOMEZ COMPANY AND CONSOLIDATED SUBSIDIARIES Consolidation Worksheet December 31, 2024 Consolidation Entries Gomez Accounts Company Martin Company Short Company Debit Credit Noncontrolling Consolidated Interest Balance Sales (1,008,000) (627,000) (560,000) Operating expenses Cost of goods sold Equity eamings of Martin 537,600 334,400 280,000 112,006 152,200 168,000 (191,880) Equity eamings of Short (80,200) Separate company net income (550,274) (220,600) (112,000) Consolidated net income Net income attributable to Noncontrolling interest (Short) Net income attributable to Noncontrolling interest (Martin) Net income attributable to Gomez Company Retained earnings-Gomez 1/1 Retained earnings-Martin 1/1 Retained earnings-Short 1/1 Net income Dividends declared Retained earnings, 12/31 Cash and receivables Inventory 966,274 714,680 330,000 560,274 220,600 112,000 131,000 (1.385,548) (935,280) (442,000) 121,500 105,680 94,000 115,000 213,000 198,000 Investment in Martin Company 1,179,324 Investment in Short Company 517,160 Land, buildings, & equipment (not) 836,112 757,840 574,000 Copyright License agreements Total assets Labies Common stock Retained eamings, 12/31 (above) Noncontrolling interest Short, 1/1 Noncontrolling interest in Martin, 1/1 Noncontrolling interests total 12/31 Totallables and equities 2,281,324 1,583,680 866,000 (383,776) (352,400) (212,000) (512,000) (306,000) (212,000) 1,385.548 935,280 442,000 (2.281,324) (1.503,680) (866,000) 이 0 0 Prepare schedules that show the calculations of the Investment in Short 12/31/24 account balances. Prepare schedules that show the calculations of the Investment in Martin 12/31/24 account balances. Consideration transferred by Martin for Short Short's separate 2023 net income Excess copyright amortization 2023 intra-entity Ending Inventory profit deferral Short's adjusted 2023 net income Percentage owned by Martin Short's separate 2024 income $ 124,800 Consideration transferred by Gomez for Martin Martin's separate 2023 net income Martin's share of Short's 2023 net income Martin's 2023 net income Excess licensing agreement amortization Martin's adjusted 2023 net income Percentage owned by Gomez 90% Excess copyright amortization Intra-entity Beginning Inventory profit recognition Intra-entity Ending Inventory profit deferral Short's adjusted 2024 net income Percentage owned by Martin Investment in Short 12/31/24 80% Equity in earnings of Martin 2023 Martin's 2024 net income Excess licensing agreement amortization Martin's adjusted 2024 net income Percentage owned by Gomez 80% Equity in earnings of Martin 2024 0 90%

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter11: Depreciation, Depletion, Impairment, And Disposal

Section: Chapter Questions

Problem 17P: On December 31, 2019, Vail Company owned the following assets: Vail computes depreciation and...

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Question

On January 1, 2023, Gomez Company acquired 90 percent of Martin Company’s outstanding stock for $756,720. The 10 percent noncontrolling interest had an assessed fair value of $84,080 on that date. Martin's acquisition-date book value consisted of $306,000 common stock and $446,000 retained earnings. Any acquisition-date excess fair value over book value was attributed to an unrecorded licensing agreement owned by Martin with an estimated remaining life of 12 years. Gomez uses the equity method to account for its investment in Martin.

Also on January 1, 2023, Martin acquired an 80 percent interest in Short Company for $351,800. At the acquisition date, the 20 percent noncontrolling interest fair value was $87,950. Short's acquisition-date book value consisted of $203,000 common stock and $183,000 retained earnings. Any excess fair value was attributed to a fully amortized copyright that had a remaining life of 5 years. Martin uses the equity method to account for its investment in Short. Reported separate net income (before inclusion of equity method income) totals for 2023 follow:

Martin Company	$ 178,600
Short Company	124,800

The following are the 2024 financial statements for these three companies (credit balances indicated by parentheses). Short has transferred inventory to Martin since the takeover amounting to $76,000 (2023) and $86,000 (2024). These transactions include the same markup applicable to Short’s outside sales. In each year, Martin carried 20 percent of this inventory into the succeeding year before disposing of it. An effective tax rate of 21 percent is applicable to all companies. All dividend declarations are paid in the same period.

Accounts	Gomez Company	Martin Company	Short Company
Sales	$ (1,008,000)	$ (627,000)	$ (560,000)
Cost of goods sold	537,600	334,400	280,000
Operating expenses	112,006	152,200	168,000
Equity income of Martin	(191,880)	0	0
Equity income of Short	0	(80,200)	0
Net income	$ (550,274)	$ (220,600)	$ (112,000)
Retained earnings, 1/1/24	$ (966,274)	$ (714,680)	$ (330,000)
Net income (above)	(550,274)	(220,600)	(112,000)
Dividends declared	131,000	0	0
Retained earnings, 12/31/24	$ (1,385,548)	$ (935,280)	$ (442,000)
Cash and receivables	$ 121,500	$ 105,680	$ 94,000
Inventory	115,000	213,000	198,000
Investment in Martin Company	1,179,324	0
Investment in Short Company	0	517,160	0
Land, buildings, and equipment (net)	836,112	757,840	574,000
Total assets	$ 2,281,324	$ 1,593,680	$ 866,000
Liabilities	$ (383,776)	$ (352,400)	$ (212,000)
Common stock	(512,000)	(306,000)	(212,000)
Retained earnings, 12/31/24	(1,385,548)	(935,280)	(442,000)
Total liabilities and equities	$ (2,281,324)	$ (1,593,680)	$ (866,000)

a1. Prepare schedules that show the calculations of the Investment in Short 12/31/24 account balances.
a2. Prepare schedules that show the calculations of the Investment in Martin 12/31/24 account balances.
b. Prepare the business combination’s 2024 consolidation worksheet; ignore income tax effects.

GOMEZ COMPANY AND CONSOLIDATED SUBSIDIARIES
Consolidation Worksheet
December 31, 2024
Consolidation Entries
Gomez
Accounts
Company
Martin
Company
Short
Company
Debit
Credit
Noncontrolling Consolidated
Interest Balance
Sales
(1,008,000)
(627,000)
(560,000)
Operating expenses
Cost of goods sold
Equity eamings of Martin
537,600
334,400
280,000
112,006
152,200
168,000
(191,880)
Equity eamings of Short
(80,200)
Separate company net income
(550,274)
(220,600)
(112,000)
Consolidated net income
Net income attributable to Noncontrolling interest (Short)
Net income attributable to Noncontrolling interest (Martin)
Net income attributable to Gomez Company
Retained earnings-Gomez 1/1
Retained earnings-Martin 1/1
Retained earnings-Short 1/1
Net income
Dividends declared
Retained earnings, 12/31
Cash and receivables
Inventory
966,274
714,680
330,000
560,274
220,600
112,000
131,000
(1.385,548)
(935,280)
(442,000)
121,500
105,680
94,000
115,000
213,000
198,000
Investment in Martin Company
1,179,324
Investment in Short Company
517,160
Land, buildings, & equipment (not)
836,112
757,840
574,000
Copyright
License agreements
Total assets
Labies
Common stock
Retained eamings, 12/31 (above)
Noncontrolling interest Short, 1/1
Noncontrolling interest in Martin, 1/1
Noncontrolling interests total 12/31
Totallables and equities
2,281,324
1,583,680
866,000
(383,776)
(352,400)
(212,000)
(512,000)
(306,000)
(212,000)
1,385.548
935,280
442,000
(2.281,324)
(1.503,680)
(866,000)
이
0
0

Prepare schedules that show the calculations of the Investment in Short 12/31/24 account balances. Prepare schedules that show the calculations of the Investment in Martin 12/31/24 account balances.
Consideration transferred by Martin for Short
Short's separate 2023 net income
Excess copyright amortization
2023 intra-entity Ending Inventory profit deferral
Short's adjusted 2023 net income
Percentage owned by Martin
Short's separate 2024 income
$
124,800
Consideration transferred by Gomez for Martin
Martin's separate 2023 net income
Martin's share of Short's 2023 net income
Martin's 2023 net income
Excess licensing agreement amortization
Martin's adjusted 2023 net income
Percentage owned by Gomez
90%
Excess copyright amortization
Intra-entity Beginning Inventory profit recognition
Intra-entity Ending Inventory profit deferral
Short's adjusted 2024 net income
Percentage owned by Martin
Investment in Short 12/31/24
80%
Equity in earnings of Martin 2023
Martin's 2024 net income
Excess licensing agreement amortization
Martin's adjusted 2024 net income
Percentage owned by Gomez
80%
Equity in earnings of Martin 2024
0
90%

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