Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Question
Chapter 5, Problem 5.3P
To determine
Concept Introduction:
Intercompany adjustments in consolidation- Inter-company receivables and payables are eliminated, and subsidiary’s capital is also eliminated.
To prepare The necessary worksheet for consolidation of given accounts
Expert Solution & Answer
Answer to Problem 5.3P
| Eliminations & Adjustments | NCI | Controlled | Consolidated Balance Sheet | ||||
| G | A | Dr. | Cr | ||||
| Cash | 404,486 | 72,625 | 477,111 | ||||
| Accounts Receivable(net) | 752,500 | 105,000 | 857,500 | ||||
| Interest Receivable | 9,625 | (9,625) | - | ||||
| Inventory | 1,950,000 | 900,000 | 2,850,000 | ||||
| Investment in Appliance outlets | 1,700,000 | (1,700,000) | - | ||||
| Investment in 11% bonds | 254,000 | (254,000) | - | ||||
| Investment in Mortgage | 175,000 | (175,000) | - | ||||
| Property,plant and Equipment | 9,000,000 | 2,950,000 | 167,500 | (195,000) | 11,922,500 | ||
| (1,695,000) | (940,000) | (2,635,000) | |||||
| Accounts Payable | (670,000) | (80,000) | (750,000) | ||||
| Interest Payable | (18,333) | (9,625) | 9,625 | (18,333) | |||
| Bonds Payable(11%) | (2,000,000) | (500,000) | 250,000 | (2,250,000) | |||
| Discount on bonds payable | 10,470 | 12,000 | (6,000) | 16,470 | |||
| Mortgage Payable | (175,000) | 175,000 | - | ||||
| Common stock($5 par) | (3,200,000) | (3,200,000) | |||||
| Common stock($10 par) | (800,000) | 800,000 | - | ||||
| Other paid-In capital in excess of par | (4,550,000) | (625,000) | 625,000 | (4,550,000) | |||
| Retained Earnings, January 1,2016 | (1,011,123) | (770,000) | 770,000 | (256,000) | (1,267,123) | ||
| Sales | (9,800,000) | (3,000,000) | (12,800,000) | ||||
| Gain on sale of Building | (27,500) | 27,500 | - | ||||
| Interest income | (36,125) | 27,500 | (8,625) | ||||
| Dividend Income | (48,000) | 48,000 | - | ||||
| Cost of goods sold | 4,940,000 | 1,700,000 | 6,640,000 | ||||
| Depreciation expense | 717,000 | 95,950 | 812,950 | ||||
| Interest expense | 223,000 | 67,544 | (27,500) | 263,044 | |||
| Other expenses | 2,600,000 | 936,506 | 3,536,506 | ||||
| Dividends declared | 320,000 | 60,000 | (60,000) | 320,000 | |||
| Loss on settlement of bonds | 10,000 | 10,000 | |||||
| 200,000 | 200,000 | ||||||
| NCI | (427,000) | (427,000) | |||||
| Totals | - | 0 | 3,090,875 | -3,090,875 | 0 | 0 | 0 |
| 0 | |||||||
Explanation of Solution
| Computation of Goodwill | |
| $ | |
| Common stock($10 par) | 800,000 |
| Other paid in capital in excess of par | 625,000 |
| Retained earnings | 450,000 |
| Total value of Appliance Outlets | 1,875,000 |
| General Appliance's stake @80% | 1,500,000 |
| Consideration paid | 1,700,000 |
| Goodwill (Consideration Paid-Value of stake acquired) | 200,000 |
| Computation of Goodwill |
| Schedule of bonds discount amortization | ||
| Date | Particulars | $ |
| 31.12.12 | Discount on bond issued | 24000 |
| 31.12.13 | Less. Discount amortization | -3000 |
| 31.12.13 | Closing balance | 21000 |
| 31.12.14 | Less. Discount amortization | -3000 |
| 31.12.14 | Closing balance | 18000 |
| 31.12.15 | Less. Discount amortization | -3000 |
| 31.12.15 | Closing balance | 15000 |
| 31.12.16 | Less. Discount amortization | -3000 |
| 31.12.16 | Closing balance | 12000 |
| Investment in 11% bonds | 254000 |
| Less. Nominal | -250,000 |
| Add. Discount on bonds (50%) | -6000 |
| Loss on retirement of bond | 10,000 |
| Minority Interest | |
| Common stock($10 par) | 800,000 |
| Other paid-In capital in excess of par | 625,000 |
| Retained Earnings,January 1,2016 | 770,000 |
| 20% Minority Interest | 439,000 |
| Less: Dividend | -12000 |
| Minority Interest | 427,000 |
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