When intercompany transfer of asset occurs, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover, in the consolidation the gain or loss will be eliminated. The amount of the differential as of January 1, 20X8.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 7, Problem 7.38P

a

To determine

Introduction:When intercompany transfer of asset occurs, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover, in the consolidation the gain or loss will be eliminated.

The amount of the differential as of January 1, 20X8.

a

Expert Solution

Answer to Problem 7.38P

The amount of differential as of January 1, 20X8 $120,000.

Explanation of Solution

Items	Amount $
Original differential at December 31, 20X1	150,000
Less: portion written off for sale of inventory	(30,000)
Remaining differential January 1, 20X8	120,000

b.

To determine

Introduction:When intercompany transfer of asset occurs, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover, in the consolidation the gain or loss will be eliminated.

The balance in R’s investment in S stock account as of December 31, 20X8.

b.

Expert Solution

Answer to Problem 7.38P

The balance in R’s investment in S stock account as of December 31, 20X8 $2,974,000.

Explanation of Solution

Items	Amount $	Amount $
S stockholders’ equity:
Common stock		1,000,000
Additional paid-in capital		1.350,000
Retained earnings December 31, 20X8:
S retained earnings January 1, 20X8	1,400,000
S net income 20X8	110,000
S Dividends declared	(20,000)
Retained earnings December 31, 20X8		1,490,000
Stockholders’ equity, December 31, 20X8		3,840,000

Book value of Shares held in R $3,840,000 × .75		2,880,000
Remaining differential at January 1, 20X8 $120,000 × .75		90,000
Deferred gain on downstream sale of land		(23,000)
Loss on sale of equipment ($30,000 – 3,000)		27,000
Balance in investment in S account December 31, 20X8		2,974,000

c

To determine

Introduction:When intercompany transfer of asset occur, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover in the consolidation the gain or loss will be eliminated.

The consolidation entries required to prepare a three-part consolidated worksheet at December 31, 20X8.

c

Expert Solution

Explanation of Solution

Particulars	Debit $	Credit $
1. Elimination of beginning investment
Common stock	1,000,000
Additional paid-in capital	1,350,000
Retained earnings	1,400,000
Income from S	109,500
NCI in Net income of S	36,500
Dividends declared		20,000
Investment in S		2,907,000
NCI in Net assets of S		969,000
(beginning investment in S eliminated by reversal)

2. Excess value of differential reclassification
Land	56,000
Goodwill	64,000
Investment in S		90,000
NCI in net assets of S		30,000
(recognition of differential on land and goodwill)

3. Elimination of intercompany other income and expenses
Other income	80,000
Other expenses		80,000
(intercompany other income and expenses eliminated by setoff)
4. Elimination of intercompany payable and receivables
Current payables	20,000
Current receivable		20,000
(intercompany receivable and payables eliminated)

5. Elimination of intercompany dividends owed
Current payables	3,750
Current receivable		3,750
(dividends receivable and payable eliminated)

6. Elimination of gain on purchase of land
Investment in S	23,000
Land		23,000
(gain on purchase of land eliminated)

7. Elimination of gain on equipment
Equipment	185,000
Loss on sale		40,000
Accumulated depreciation		145,000
( gain on equipment eliminated)

Depreciation expense	4,000
Accumulated depreciation		4,000

Elimination of beginning investment

Investment in S Corp $2,907,000 = ($3,896,000 − 20,000) × .75

Non-controlling interest $969,000 = ($3,896,000 − 20,000) × .25

Differential on land and investment is recognized.
Intercompany income and expenses are eliminated by setoff.
Intercompany dividends owed is eliminated.
Intercompany receivable and payable is eliminated by setoff.
Gain on purchase of investment eliminated by reversal.
Loss on sale of equipment is eliminated by crediting and depreciation is recognized.

d

To determine

Introduction:When intercompany transfer of asset occur, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover in the consolidation the gain or loss will be eliminated.

The three-part consolidation worksheet for December 31, 20X9.

d

Expert Solution

Answer to Problem 7.38P

Balance as per three part consolidated work sheet:

Retained earnings $2,649,300, Net assets $6,359,050.

Explanation of Solution

			Elimination
Items	P	S	Debit $	Credit $	Consolidation
Sales	4,801,000	985,000			5,786,000
Other income	90,000	(35,000)	80,000	40,000	15,000
Less:
Cost of goods sold	(2,193,000)	(525,000)			(2,718,000)
Depreciation expenses	(202,000)	(88,000)	4,000		(294,000)
Other expenses	(1,381,000)	(227,000)		80,000	(1,528,000)
Income from S Corp	109,500		109,500
Consolidated net income					1,261,000
Non-controlling interest			36,500		(36,500)
Net income carry forward	2,649,300	1,490,000	1,630,000	140,000	2,649,300

Retained earnings	1,474,800	1,400,000	1,400,000		1,474,800
Net income	2,649,300	1,490,000	1,630,000	140,000	2,649,300
Less dividends declared	(50,000)	(20,000)		20,000	(50,000)
Retained earnings Dec 31	2,649,300	1,490,000	1,630,000	140,000	2,649,300

Cash	50,700	38,000			88,700
Accounts receivable	101,800	89,400		23,750	167,450
Inventory	286,000	218,900			504,900
Land	400,000	1,200,000	56,000	23,000	1,633,000
Buildings & equipment	2,400,000	2,990,000	185,000		5,575,000
Less: Accumulated Depr.	(1,105,000)	(420,000)		145,000
				4,000	(1,674,000)
Investment in S Corp	2,974,000		23,000	2,907,000
				90,000
Goodwill			64,000		64,000
Total Assets	5,107,500	4,116,300	328,000	2,192,750	6,359,050

Accounts payable	86,200	76,300	23,750		138,750
Bonds payable	1,000,000	200,000			1,200,000
Common stock	100,000	1,000,000	1,000,000		100,000
Additional paid-in capital	1,272,000	1,350,000	1,350,000		1,272,000
Retained earnings	2,649,300	1,490,000	1,630,000	140,000	2,649,300
NCI in Net assets of S				969,000	999,000
				30,000
Total Liabilities & equity	5,107,500	4,116,300	328,000	2,192,750	6,359,050

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

If CARDO Co purchases the net assets of SYANO Co by issuing 5,000 shares of their P20 par valueshares with a fair value of P40 per share, incurs a mortgage loan for P90,000, pays P150,000 cash andpaying direct, indirect and stock issue costs of P75,000, P50,000 and P40,000 respective.REQUIREMENTS: Goodwill and Consolidated Total Assets at the date of acquisition

If CARDO Co purchases the net assets of SYANO Co by issuing 5,000 shares of their P20 par valueshares with a fair value of P40 per share, incurs a mortgage loan for P90,000, pays P150,000 cash andpaying direct, indirect and stock issue costs of P75,000, P50,000 and P40,000 respective. REQUIREMENTS:A. GoodwillB. Consolidated Total Assets at the date of acquisition

2. Banana Company purchases 80 percent of Mango. At the date of acquisition, Mango has revenue of P250,000 and expenses of P170,000. What amount of pre-acquisition earnings will be created on the consolidated income statement at the acquisition date? 3. Delta Corporation acquires 70 percent of Bravo Company’s stock. What amount of non-controlling interest is recognized on the acquisition date balance sheet if Telephone has the following account balances? Book Value Market Value Cash P10,000 P10,000 Inventory 80,000 80,000 Plant Assets (net) 350,000 350,000 Cost of Goods Sold 130,000 Depreciation Expense 20,000 Liabilities (110,000) (110,000) Common Stock (30,000) Retained…

Answer 2

Question

Chapter 7, Problem 7.38P

a

To determine

Introduction:When intercompany transfer of asset occurs, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover, in the consolidation the gain or loss will be eliminated.

The amount of the differential as of January 1, 20X8.

a

Expert Solution

Answer to Problem 7.38P

The amount of differential as of January 1, 20X8 $120,000.

Explanation of Solution

Items	Amount $
Original differential at December 31, 20X1	150,000
Less: portion written off for sale of inventory	(30,000)
Remaining differential January 1, 20X8	120,000

b.

To determine

Introduction:When intercompany transfer of asset occurs, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover, in the consolidation the gain or loss will be eliminated.

The balance in R’s investment in S stock account as of December 31, 20X8.

b.

Expert Solution

Answer to Problem 7.38P

The balance in R’s investment in S stock account as of December 31, 20X8 $2,974,000.

Explanation of Solution

Items	Amount $	Amount $
S stockholders’ equity:
Common stock		1,000,000
Additional paid-in capital		1.350,000
Retained earnings December 31, 20X8:
S retained earnings January 1, 20X8	1,400,000
S net income 20X8	110,000
S Dividends declared	(20,000)
Retained earnings December 31, 20X8		1,490,000
Stockholders’ equity, December 31, 20X8		3,840,000

Book value of Shares held in R $3,840,000 × .75		2,880,000
Remaining differential at January 1, 20X8 $120,000 × .75		90,000
Deferred gain on downstream sale of land		(23,000)
Loss on sale of equipment ($30,000 – 3,000)		27,000
Balance in investment in S account December 31, 20X8		2,974,000

c

To determine

Introduction:When intercompany transfer of asset occur, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover in the consolidation the gain or loss will be eliminated.

The consolidation entries required to prepare a three-part consolidated worksheet at December 31, 20X8.

c

Expert Solution

Explanation of Solution

Particulars	Debit $	Credit $
1. Elimination of beginning investment
Common stock	1,000,000
Additional paid-in capital	1,350,000
Retained earnings	1,400,000
Income from S	109,500
NCI in Net income of S	36,500
Dividends declared		20,000
Investment in S		2,907,000
NCI in Net assets of S		969,000
(beginning investment in S eliminated by reversal)

2. Excess value of differential reclassification
Land	56,000
Goodwill	64,000
Investment in S		90,000
NCI in net assets of S		30,000
(recognition of differential on land and goodwill)

3. Elimination of intercompany other income and expenses
Other income	80,000
Other expenses		80,000
(intercompany other income and expenses eliminated by setoff)
4. Elimination of intercompany payable and receivables
Current payables	20,000
Current receivable		20,000
(intercompany receivable and payables eliminated)

5. Elimination of intercompany dividends owed
Current payables	3,750
Current receivable		3,750
(dividends receivable and payable eliminated)

6. Elimination of gain on purchase of land
Investment in S	23,000
Land		23,000
(gain on purchase of land eliminated)

7. Elimination of gain on equipment
Equipment	185,000
Loss on sale		40,000
Accumulated depreciation		145,000
( gain on equipment eliminated)

Depreciation expense	4,000
Accumulated depreciation		4,000

Elimination of beginning investment

Investment in S Corp $2,907,000 = ($3,896,000 − 20,000) × .75

Non-controlling interest $969,000 = ($3,896,000 − 20,000) × .25

Differential on land and investment is recognized.
Intercompany income and expenses are eliminated by setoff.
Intercompany dividends owed is eliminated.
Intercompany receivable and payable is eliminated by setoff.
Gain on purchase of investment eliminated by reversal.
Loss on sale of equipment is eliminated by crediting and depreciation is recognized.

d

To determine

Introduction:When intercompany transfer of asset occur, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover in the consolidation the gain or loss will be eliminated.

The three-part consolidation worksheet for December 31, 20X9.

d

Expert Solution

Answer to Problem 7.38P

Balance as per three part consolidated work sheet:

Retained earnings $2,649,300, Net assets $6,359,050.

Explanation of Solution

			Elimination
Items	P	S	Debit $	Credit $	Consolidation
Sales	4,801,000	985,000			5,786,000
Other income	90,000	(35,000)	80,000	40,000	15,000
Less:
Cost of goods sold	(2,193,000)	(525,000)			(2,718,000)
Depreciation expenses	(202,000)	(88,000)	4,000		(294,000)
Other expenses	(1,381,000)	(227,000)		80,000	(1,528,000)
Income from S Corp	109,500		109,500
Consolidated net income					1,261,000
Non-controlling interest			36,500		(36,500)
Net income carry forward	2,649,300	1,490,000	1,630,000	140,000	2,649,300

Retained earnings	1,474,800	1,400,000	1,400,000		1,474,800
Net income	2,649,300	1,490,000	1,630,000	140,000	2,649,300
Less dividends declared	(50,000)	(20,000)		20,000	(50,000)
Retained earnings Dec 31	2,649,300	1,490,000	1,630,000	140,000	2,649,300

Cash	50,700	38,000			88,700
Accounts receivable	101,800	89,400		23,750	167,450
Inventory	286,000	218,900			504,900
Land	400,000	1,200,000	56,000	23,000	1,633,000
Buildings & equipment	2,400,000	2,990,000	185,000		5,575,000
Less: Accumulated Depr.	(1,105,000)	(420,000)		145,000
				4,000	(1,674,000)
Investment in S Corp	2,974,000		23,000	2,907,000
				90,000
Goodwill			64,000		64,000
Total Assets	5,107,500	4,116,300	328,000	2,192,750	6,359,050

Accounts payable	86,200	76,300	23,750		138,750
Bonds payable	1,000,000	200,000			1,200,000
Common stock	100,000	1,000,000	1,000,000		100,000
Additional paid-in capital	1,272,000	1,350,000	1,350,000		1,272,000
Retained earnings	2,649,300	1,490,000	1,630,000	140,000	2,649,300
NCI in Net assets of S				969,000	999,000
				30,000
Total Liabilities & equity	5,107,500	4,116,300	328,000	2,192,750	6,359,050

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 7, Problem 7.38P

a

To determine

Introduction:When intercompany transfer of asset occurs, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover, in the consolidation the gain or loss will be eliminated.

The amount of the differential as of January 1, 20X8.

a

Expert Solution

Answer to Problem 7.38P

The amount of differential as of January 1, 20X8 $120,000.

Explanation of Solution

Items	Amount $
Original differential at December 31, 20X1	150,000
Less: portion written off for sale of inventory	(30,000)
Remaining differential January 1, 20X8	120,000

b.

To determine

Introduction:When intercompany transfer of asset occurs, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover, in the consolidation the gain or loss will be eliminated.

The balance in R’s investment in S stock account as of December 31, 20X8.

b.

Expert Solution

Answer to Problem 7.38P

The balance in R’s investment in S stock account as of December 31, 20X8 $2,974,000.

Explanation of Solution

Items	Amount $	Amount $
S stockholders’ equity:
Common stock		1,000,000
Additional paid-in capital		1.350,000
Retained earnings December 31, 20X8:
S retained earnings January 1, 20X8	1,400,000
S net income 20X8	110,000
S Dividends declared	(20,000)
Retained earnings December 31, 20X8		1,490,000
Stockholders’ equity, December 31, 20X8		3,840,000

Book value of Shares held in R $3,840,000 × .75		2,880,000
Remaining differential at January 1, 20X8 $120,000 × .75		90,000
Deferred gain on downstream sale of land		(23,000)
Loss on sale of equipment ($30,000 – 3,000)		27,000
Balance in investment in S account December 31, 20X8		2,974,000

c

To determine

Introduction:When intercompany transfer of asset occur, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover in the consolidation the gain or loss will be eliminated.

The consolidation entries required to prepare a three-part consolidated worksheet at December 31, 20X8.

c

Expert Solution

Explanation of Solution

Particulars	Debit $	Credit $
1. Elimination of beginning investment
Common stock	1,000,000
Additional paid-in capital	1,350,000
Retained earnings	1,400,000
Income from S	109,500
NCI in Net income of S	36,500
Dividends declared		20,000
Investment in S		2,907,000
NCI in Net assets of S		969,000
(beginning investment in S eliminated by reversal)

2. Excess value of differential reclassification
Land	56,000
Goodwill	64,000
Investment in S		90,000
NCI in net assets of S		30,000
(recognition of differential on land and goodwill)

3. Elimination of intercompany other income and expenses
Other income	80,000
Other expenses		80,000
(intercompany other income and expenses eliminated by setoff)
4. Elimination of intercompany payable and receivables
Current payables	20,000
Current receivable		20,000
(intercompany receivable and payables eliminated)

5. Elimination of intercompany dividends owed
Current payables	3,750
Current receivable		3,750
(dividends receivable and payable eliminated)

6. Elimination of gain on purchase of land
Investment in S	23,000
Land		23,000
(gain on purchase of land eliminated)

7. Elimination of gain on equipment
Equipment	185,000
Loss on sale		40,000
Accumulated depreciation		145,000
( gain on equipment eliminated)

Depreciation expense	4,000
Accumulated depreciation		4,000

Elimination of beginning investment

Investment in S Corp $2,907,000 = ($3,896,000 − 20,000) × .75

Non-controlling interest $969,000 = ($3,896,000 − 20,000) × .25

Differential on land and investment is recognized.
Intercompany income and expenses are eliminated by setoff.
Intercompany dividends owed is eliminated.
Intercompany receivable and payable is eliminated by setoff.
Gain on purchase of investment eliminated by reversal.
Loss on sale of equipment is eliminated by crediting and depreciation is recognized.

d

To determine

Introduction:When intercompany transfer of asset occur, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover in the consolidation the gain or loss will be eliminated.

The three-part consolidation worksheet for December 31, 20X9.

d

Expert Solution

Answer to Problem 7.38P

Balance as per three part consolidated work sheet:

Retained earnings $2,649,300, Net assets $6,359,050.

Explanation of Solution

			Elimination
Items	P	S	Debit $	Credit $	Consolidation
Sales	4,801,000	985,000			5,786,000
Other income	90,000	(35,000)	80,000	40,000	15,000
Less:
Cost of goods sold	(2,193,000)	(525,000)			(2,718,000)
Depreciation expenses	(202,000)	(88,000)	4,000		(294,000)
Other expenses	(1,381,000)	(227,000)		80,000	(1,528,000)
Income from S Corp	109,500		109,500
Consolidated net income					1,261,000
Non-controlling interest			36,500		(36,500)
Net income carry forward	2,649,300	1,490,000	1,630,000	140,000	2,649,300

Retained earnings	1,474,800	1,400,000	1,400,000		1,474,800
Net income	2,649,300	1,490,000	1,630,000	140,000	2,649,300
Less dividends declared	(50,000)	(20,000)		20,000	(50,000)
Retained earnings Dec 31	2,649,300	1,490,000	1,630,000	140,000	2,649,300

Cash	50,700	38,000			88,700
Accounts receivable	101,800	89,400		23,750	167,450
Inventory	286,000	218,900			504,900
Land	400,000	1,200,000	56,000	23,000	1,633,000
Buildings & equipment	2,400,000	2,990,000	185,000		5,575,000
Less: Accumulated Depr.	(1,105,000)	(420,000)		145,000
				4,000	(1,674,000)
Investment in S Corp	2,974,000		23,000	2,907,000
				90,000
Goodwill			64,000		64,000
Total Assets	5,107,500	4,116,300	328,000	2,192,750	6,359,050

Accounts payable	86,200	76,300	23,750		138,750
Bonds payable	1,000,000	200,000			1,200,000
Common stock	100,000	1,000,000	1,000,000		100,000
Additional paid-in capital	1,272,000	1,350,000	1,350,000		1,272,000
Retained earnings	2,649,300	1,490,000	1,630,000	140,000	2,649,300
NCI in Net assets of S				969,000	999,000
				30,000
Total Liabilities & equity	5,107,500	4,116,300	328,000	2,192,750	6,359,050

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 7, Problem 7.38P

a

To determine

Introduction:When intercompany transfer of asset occurs, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover, in the consolidation the gain or loss will be eliminated.

The amount of the differential as of January 1, 20X8.

a

Expert Solution

Answer to Problem 7.38P

The amount of differential as of January 1, 20X8 $120,000.

Explanation of Solution

Items	Amount $
Original differential at December 31, 20X1	150,000
Less: portion written off for sale of inventory	(30,000)
Remaining differential January 1, 20X8	120,000

b.

To determine

Introduction:When intercompany transfer of asset occurs, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover, in the consolidation the gain or loss will be eliminated.

The balance in R’s investment in S stock account as of December 31, 20X8.

b.

Expert Solution

Answer to Problem 7.38P

The balance in R’s investment in S stock account as of December 31, 20X8 $2,974,000.

Explanation of Solution

Items	Amount $	Amount $
S stockholders’ equity:
Common stock		1,000,000
Additional paid-in capital		1.350,000
Retained earnings December 31, 20X8:
S retained earnings January 1, 20X8	1,400,000
S net income 20X8	110,000
S Dividends declared	(20,000)
Retained earnings December 31, 20X8		1,490,000
Stockholders’ equity, December 31, 20X8		3,840,000

Book value of Shares held in R $3,840,000 × .75		2,880,000
Remaining differential at January 1, 20X8 $120,000 × .75		90,000
Deferred gain on downstream sale of land		(23,000)
Loss on sale of equipment ($30,000 – 3,000)		27,000
Balance in investment in S account December 31, 20X8		2,974,000

c

To determine

Introduction:When intercompany transfer of asset occur, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover in the consolidation the gain or loss will be eliminated.

The consolidation entries required to prepare a three-part consolidated worksheet at December 31, 20X8.

c

Expert Solution

Explanation of Solution

Particulars	Debit $	Credit $
1. Elimination of beginning investment
Common stock	1,000,000
Additional paid-in capital	1,350,000
Retained earnings	1,400,000
Income from S	109,500
NCI in Net income of S	36,500
Dividends declared		20,000
Investment in S		2,907,000
NCI in Net assets of S		969,000
(beginning investment in S eliminated by reversal)

2. Excess value of differential reclassification
Land	56,000
Goodwill	64,000
Investment in S		90,000
NCI in net assets of S		30,000
(recognition of differential on land and goodwill)

3. Elimination of intercompany other income and expenses
Other income	80,000
Other expenses		80,000
(intercompany other income and expenses eliminated by setoff)
4. Elimination of intercompany payable and receivables
Current payables	20,000
Current receivable		20,000
(intercompany receivable and payables eliminated)

5. Elimination of intercompany dividends owed
Current payables	3,750
Current receivable		3,750
(dividends receivable and payable eliminated)

6. Elimination of gain on purchase of land
Investment in S	23,000
Land		23,000
(gain on purchase of land eliminated)

7. Elimination of gain on equipment
Equipment	185,000
Loss on sale		40,000
Accumulated depreciation		145,000
( gain on equipment eliminated)

Depreciation expense	4,000
Accumulated depreciation		4,000

Elimination of beginning investment

Investment in S Corp $2,907,000 = ($3,896,000 − 20,000) × .75

Non-controlling interest $969,000 = ($3,896,000 − 20,000) × .25

Differential on land and investment is recognized.
Intercompany income and expenses are eliminated by setoff.
Intercompany dividends owed is eliminated.
Intercompany receivable and payable is eliminated by setoff.
Gain on purchase of investment eliminated by reversal.
Loss on sale of equipment is eliminated by crediting and depreciation is recognized.

d

To determine

Introduction:When intercompany transfer of asset occur, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover in the consolidation the gain or loss will be eliminated.

The three-part consolidation worksheet for December 31, 20X9.

d

Expert Solution

Answer to Problem 7.38P

Balance as per three part consolidated work sheet:

Retained earnings $2,649,300, Net assets $6,359,050.

Explanation of Solution

			Elimination
Items	P	S	Debit $	Credit $	Consolidation
Sales	4,801,000	985,000			5,786,000
Other income	90,000	(35,000)	80,000	40,000	15,000
Less:
Cost of goods sold	(2,193,000)	(525,000)			(2,718,000)
Depreciation expenses	(202,000)	(88,000)	4,000		(294,000)
Other expenses	(1,381,000)	(227,000)		80,000	(1,528,000)
Income from S Corp	109,500		109,500
Consolidated net income					1,261,000
Non-controlling interest			36,500		(36,500)
Net income carry forward	2,649,300	1,490,000	1,630,000	140,000	2,649,300

Retained earnings	1,474,800	1,400,000	1,400,000		1,474,800
Net income	2,649,300	1,490,000	1,630,000	140,000	2,649,300
Less dividends declared	(50,000)	(20,000)		20,000	(50,000)
Retained earnings Dec 31	2,649,300	1,490,000	1,630,000	140,000	2,649,300

Cash	50,700	38,000			88,700
Accounts receivable	101,800	89,400		23,750	167,450
Inventory	286,000	218,900			504,900
Land	400,000	1,200,000	56,000	23,000	1,633,000
Buildings & equipment	2,400,000	2,990,000	185,000		5,575,000
Less: Accumulated Depr.	(1,105,000)	(420,000)		145,000
				4,000	(1,674,000)
Investment in S Corp	2,974,000		23,000	2,907,000
				90,000
Goodwill			64,000		64,000
Total Assets	5,107,500	4,116,300	328,000	2,192,750	6,359,050

Accounts payable	86,200	76,300	23,750		138,750
Bonds payable	1,000,000	200,000			1,200,000
Common stock	100,000	1,000,000	1,000,000		100,000
Additional paid-in capital	1,272,000	1,350,000	1,350,000		1,272,000
Retained earnings	2,649,300	1,490,000	1,630,000	140,000	2,649,300
NCI in Net assets of S				969,000	999,000
				30,000
Total Liabilities & equity	5,107,500	4,116,300	328,000	2,192,750	6,359,050

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 7, Problem 7.38P

a

To determine

Introduction:When intercompany transfer of asset occurs, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover, in the consolidation the gain or loss will be eliminated.

The amount of the differential as of January 1, 20X8.

a

Expert Solution

Answer to Problem 7.38P

The amount of differential as of January 1, 20X8 $120,000.

Explanation of Solution

Items	Amount $
Original differential at December 31, 20X1	150,000
Less: portion written off for sale of inventory	(30,000)
Remaining differential January 1, 20X8	120,000

b.

To determine

Introduction:When intercompany transfer of asset occurs, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover, in the consolidation the gain or loss will be eliminated.

The balance in R’s investment in S stock account as of December 31, 20X8.

b.

Expert Solution

Answer to Problem 7.38P

The balance in R’s investment in S stock account as of December 31, 20X8 $2,974,000.

Explanation of Solution

Items	Amount $	Amount $
S stockholders’ equity:
Common stock		1,000,000
Additional paid-in capital		1.350,000
Retained earnings December 31, 20X8:
S retained earnings January 1, 20X8	1,400,000
S net income 20X8	110,000
S Dividends declared	(20,000)
Retained earnings December 31, 20X8		1,490,000
Stockholders’ equity, December 31, 20X8		3,840,000

Book value of Shares held in R $3,840,000 × .75		2,880,000
Remaining differential at January 1, 20X8 $120,000 × .75		90,000
Deferred gain on downstream sale of land		(23,000)
Loss on sale of equipment ($30,000 – 3,000)		27,000
Balance in investment in S account December 31, 20X8		2,974,000

c

To determine

Introduction:When intercompany transfer of asset occur, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover in the consolidation the gain or loss will be eliminated.

The consolidation entries required to prepare a three-part consolidated worksheet at December 31, 20X8.

c

Expert Solution

Explanation of Solution

Particulars	Debit $	Credit $
1. Elimination of beginning investment
Common stock	1,000,000
Additional paid-in capital	1,350,000
Retained earnings	1,400,000
Income from S	109,500
NCI in Net income of S	36,500
Dividends declared		20,000
Investment in S		2,907,000
NCI in Net assets of S		969,000
(beginning investment in S eliminated by reversal)

2. Excess value of differential reclassification
Land	56,000
Goodwill	64,000
Investment in S		90,000
NCI in net assets of S		30,000
(recognition of differential on land and goodwill)

3. Elimination of intercompany other income and expenses
Other income	80,000
Other expenses		80,000
(intercompany other income and expenses eliminated by setoff)
4. Elimination of intercompany payable and receivables
Current payables	20,000
Current receivable		20,000
(intercompany receivable and payables eliminated)

5. Elimination of intercompany dividends owed
Current payables	3,750
Current receivable		3,750
(dividends receivable and payable eliminated)

6. Elimination of gain on purchase of land
Investment in S	23,000
Land		23,000
(gain on purchase of land eliminated)

7. Elimination of gain on equipment
Equipment	185,000
Loss on sale		40,000
Accumulated depreciation		145,000
( gain on equipment eliminated)

Depreciation expense	4,000
Accumulated depreciation		4,000

Elimination of beginning investment

Investment in S Corp $2,907,000 = ($3,896,000 − 20,000) × .75

Non-controlling interest $969,000 = ($3,896,000 − 20,000) × .25

Differential on land and investment is recognized.
Intercompany income and expenses are eliminated by setoff.
Intercompany dividends owed is eliminated.
Intercompany receivable and payable is eliminated by setoff.
Gain on purchase of investment eliminated by reversal.
Loss on sale of equipment is eliminated by crediting and depreciation is recognized.

d

To determine

Introduction:When intercompany transfer of asset occur, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover in the consolidation the gain or loss will be eliminated.

The three-part consolidation worksheet for December 31, 20X9.

d

Expert Solution

Answer to Problem 7.38P

Balance as per three part consolidated work sheet:

Retained earnings $2,649,300, Net assets $6,359,050.

Explanation of Solution

			Elimination
Items	P	S	Debit $	Credit $	Consolidation
Sales	4,801,000	985,000			5,786,000
Other income	90,000	(35,000)	80,000	40,000	15,000
Less:
Cost of goods sold	(2,193,000)	(525,000)			(2,718,000)
Depreciation expenses	(202,000)	(88,000)	4,000		(294,000)
Other expenses	(1,381,000)	(227,000)		80,000	(1,528,000)
Income from S Corp	109,500		109,500
Consolidated net income					1,261,000
Non-controlling interest			36,500		(36,500)
Net income carry forward	2,649,300	1,490,000	1,630,000	140,000	2,649,300

Retained earnings	1,474,800	1,400,000	1,400,000		1,474,800
Net income	2,649,300	1,490,000	1,630,000	140,000	2,649,300
Less dividends declared	(50,000)	(20,000)		20,000	(50,000)
Retained earnings Dec 31	2,649,300	1,490,000	1,630,000	140,000	2,649,300

Cash	50,700	38,000			88,700
Accounts receivable	101,800	89,400		23,750	167,450
Inventory	286,000	218,900			504,900
Land	400,000	1,200,000	56,000	23,000	1,633,000
Buildings & equipment	2,400,000	2,990,000	185,000		5,575,000
Less: Accumulated Depr.	(1,105,000)	(420,000)		145,000
				4,000	(1,674,000)
Investment in S Corp	2,974,000		23,000	2,907,000
				90,000
Goodwill			64,000		64,000
Total Assets	5,107,500	4,116,300	328,000	2,192,750	6,359,050

Accounts payable	86,200	76,300	23,750		138,750
Bonds payable	1,000,000	200,000			1,200,000
Common stock	100,000	1,000,000	1,000,000		100,000
Additional paid-in capital	1,272,000	1,350,000	1,350,000		1,272,000
Retained earnings	2,649,300	1,490,000	1,630,000	140,000	2,649,300
NCI in Net assets of S				969,000	999,000
				30,000
Total Liabilities & equity	5,107,500	4,116,300	328,000	2,192,750	6,359,050

Answer 6

Chapter 7, Problem 7.38P

a

To determine

Introduction:When intercompany transfer of asset occurs, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover, in the consolidation the gain or loss will be eliminated.

The amount of the differential as of January 1, 20X8.

a

Expert Solution

Answer to Problem 7.38P

The amount of differential as of January 1, 20X8 $120,000.

Explanation of Solution

Items	Amount $
Original differential at December 31, 20X1	150,000
Less: portion written off for sale of inventory	(30,000)
Remaining differential January 1, 20X8	120,000

Answer 7

Chapter 7, Problem 7.38P

a

To determine

Introduction:When intercompany transfer of asset occurs, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover, in the consolidation the gain or loss will be eliminated.

The amount of the differential as of January 1, 20X8.

Answer 8

a

Expert Solution

Answer to Problem 7.38P

The amount of differential as of January 1, 20X8 $120,000.

Answer 9

a

Expert Solution

Answer 10

a

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Items	Amount $
Original differential at December 31, 20X1	150,000
Less: portion written off for sale of inventory	(30,000)
Remaining differential January 1, 20X8	120,000

Answer 13

b.

To determine

Introduction:When intercompany transfer of asset occurs, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover, in the consolidation the gain or loss will be eliminated.

The balance in R’s investment in S stock account as of December 31, 20X8.

b.

Expert Solution

Answer to Problem 7.38P

The balance in R’s investment in S stock account as of December 31, 20X8 $2,974,000.

Explanation of Solution

Items	Amount $	Amount $
S stockholders’ equity:
Common stock		1,000,000
Additional paid-in capital		1.350,000
Retained earnings December 31, 20X8:
S retained earnings January 1, 20X8	1,400,000
S net income 20X8	110,000
S Dividends declared	(20,000)
Retained earnings December 31, 20X8		1,490,000
Stockholders’ equity, December 31, 20X8		3,840,000

Book value of Shares held in R $3,840,000 × .75		2,880,000
Remaining differential at January 1, 20X8 $120,000 × .75		90,000
Deferred gain on downstream sale of land		(23,000)
Loss on sale of equipment ($30,000 – 3,000)		27,000
Balance in investment in S account December 31, 20X8		2,974,000

Answer 14

b.

To determine

Introduction:When intercompany transfer of asset occurs, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover, in the consolidation the gain or loss will be eliminated.

The balance in R’s investment in S stock account as of December 31, 20X8.

Answer 15

b.

Expert Solution

Answer to Problem 7.38P

The balance in R’s investment in S stock account as of December 31, 20X8 $2,974,000.

Answer 16

b.

Expert Solution

Answer 17

b.

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

Items	Amount $	Amount $
S stockholders’ equity:
Common stock		1,000,000
Additional paid-in capital		1.350,000
Retained earnings December 31, 20X8:
S retained earnings January 1, 20X8	1,400,000
S net income 20X8	110,000
S Dividends declared	(20,000)
Retained earnings December 31, 20X8		1,490,000
Stockholders’ equity, December 31, 20X8		3,840,000

Book value of Shares held in R $3,840,000 × .75		2,880,000
Remaining differential at January 1, 20X8 $120,000 × .75		90,000
Deferred gain on downstream sale of land		(23,000)
Loss on sale of equipment ($30,000 – 3,000)		27,000
Balance in investment in S account December 31, 20X8		2,974,000

Answer 20

c

To determine

Introduction:When intercompany transfer of asset occur, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover in the consolidation the gain or loss will be eliminated.

The consolidation entries required to prepare a three-part consolidated worksheet at December 31, 20X8.

c

Expert Solution

Explanation of Solution

Particulars	Debit $	Credit $
1. Elimination of beginning investment
Common stock	1,000,000
Additional paid-in capital	1,350,000
Retained earnings	1,400,000
Income from S	109,500
NCI in Net income of S	36,500
Dividends declared		20,000
Investment in S		2,907,000
NCI in Net assets of S		969,000
(beginning investment in S eliminated by reversal)

2. Excess value of differential reclassification
Land	56,000
Goodwill	64,000
Investment in S		90,000
NCI in net assets of S		30,000
(recognition of differential on land and goodwill)

3. Elimination of intercompany other income and expenses
Other income	80,000
Other expenses		80,000
(intercompany other income and expenses eliminated by setoff)
4. Elimination of intercompany payable and receivables
Current payables	20,000
Current receivable		20,000
(intercompany receivable and payables eliminated)

5. Elimination of intercompany dividends owed
Current payables	3,750
Current receivable		3,750
(dividends receivable and payable eliminated)

6. Elimination of gain on purchase of land
Investment in S	23,000
Land		23,000
(gain on purchase of land eliminated)

7. Elimination of gain on equipment
Equipment	185,000
Loss on sale		40,000
Accumulated depreciation		145,000
( gain on equipment eliminated)

Depreciation expense	4,000
Accumulated depreciation		4,000

Elimination of beginning investment

Investment in S Corp $2,907,000 = ($3,896,000 − 20,000) × .75

Non-controlling interest $969,000 = ($3,896,000 − 20,000) × .25

Differential on land and investment is recognized.
Intercompany income and expenses are eliminated by setoff.
Intercompany dividends owed is eliminated.
Intercompany receivable and payable is eliminated by setoff.
Gain on purchase of investment eliminated by reversal.
Loss on sale of equipment is eliminated by crediting and depreciation is recognized.

Answer 21

c

To determine

Introduction:When intercompany transfer of asset occur, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover in the consolidation the gain or loss will be eliminated.

The consolidation entries required to prepare a three-part consolidated worksheet at December 31, 20X8.

Answer 22

c

Expert Solution

Explanation of Solution

Particulars	Debit $	Credit $
1. Elimination of beginning investment
Common stock	1,000,000
Additional paid-in capital	1,350,000
Retained earnings	1,400,000
Income from S	109,500
NCI in Net income of S	36,500
Dividends declared		20,000
Investment in S		2,907,000
NCI in Net assets of S		969,000
(beginning investment in S eliminated by reversal)

2. Excess value of differential reclassification
Land	56,000
Goodwill	64,000
Investment in S		90,000
NCI in net assets of S		30,000
(recognition of differential on land and goodwill)

3. Elimination of intercompany other income and expenses
Other income	80,000
Other expenses		80,000
(intercompany other income and expenses eliminated by setoff)
4. Elimination of intercompany payable and receivables
Current payables	20,000
Current receivable		20,000
(intercompany receivable and payables eliminated)

5. Elimination of intercompany dividends owed
Current payables	3,750
Current receivable		3,750
(dividends receivable and payable eliminated)

6. Elimination of gain on purchase of land
Investment in S	23,000
Land		23,000
(gain on purchase of land eliminated)

7. Elimination of gain on equipment
Equipment	185,000
Loss on sale		40,000
Accumulated depreciation		145,000
( gain on equipment eliminated)

Depreciation expense	4,000
Accumulated depreciation		4,000

Elimination of beginning investment

Investment in S Corp $2,907,000 = ($3,896,000 − 20,000) × .75

Non-controlling interest $969,000 = ($3,896,000 − 20,000) × .25

Differential on land and investment is recognized.
Intercompany income and expenses are eliminated by setoff.
Intercompany dividends owed is eliminated.
Intercompany receivable and payable is eliminated by setoff.
Gain on purchase of investment eliminated by reversal.
Loss on sale of equipment is eliminated by crediting and depreciation is recognized.

Answer 23

c

Expert Solution

Answer 24

c

Expert Solution

Answer 25

Expert Solution

Answer 26

d

To determine

Introduction:When intercompany transfer of asset occur, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover in the consolidation the gain or loss will be eliminated.

The three-part consolidation worksheet for December 31, 20X9.

d

Expert Solution

Answer to Problem 7.38P

Balance as per three part consolidated work sheet:

Retained earnings $2,649,300, Net assets $6,359,050.

Explanation of Solution

			Elimination
Items	P	S	Debit $	Credit $	Consolidation
Sales	4,801,000	985,000			5,786,000
Other income	90,000	(35,000)	80,000	40,000	15,000
Less:
Cost of goods sold	(2,193,000)	(525,000)			(2,718,000)
Depreciation expenses	(202,000)	(88,000)	4,000		(294,000)
Other expenses	(1,381,000)	(227,000)		80,000	(1,528,000)
Income from S Corp	109,500		109,500
Consolidated net income					1,261,000
Non-controlling interest			36,500		(36,500)
Net income carry forward	2,649,300	1,490,000	1,630,000	140,000	2,649,300

Retained earnings	1,474,800	1,400,000	1,400,000		1,474,800
Net income	2,649,300	1,490,000	1,630,000	140,000	2,649,300
Less dividends declared	(50,000)	(20,000)		20,000	(50,000)
Retained earnings Dec 31	2,649,300	1,490,000	1,630,000	140,000	2,649,300

Cash	50,700	38,000			88,700
Accounts receivable	101,800	89,400		23,750	167,450
Inventory	286,000	218,900			504,900
Land	400,000	1,200,000	56,000	23,000	1,633,000
Buildings & equipment	2,400,000	2,990,000	185,000		5,575,000
Less: Accumulated Depr.	(1,105,000)	(420,000)		145,000
				4,000	(1,674,000)
Investment in S Corp	2,974,000		23,000	2,907,000
				90,000
Goodwill			64,000		64,000
Total Assets	5,107,500	4,116,300	328,000	2,192,750	6,359,050

Accounts payable	86,200	76,300	23,750		138,750
Bonds payable	1,000,000	200,000			1,200,000
Common stock	100,000	1,000,000	1,000,000		100,000
Additional paid-in capital	1,272,000	1,350,000	1,350,000		1,272,000
Retained earnings	2,649,300	1,490,000	1,630,000	140,000	2,649,300
NCI in Net assets of S				969,000	999,000
				30,000
Total Liabilities & equity	5,107,500	4,116,300	328,000	2,192,750	6,359,050

Answer 27

d

To determine

Introduction:When intercompany transfer of asset occur, the parent company must make adjustments in preparing consolidated financial statements as long as the asset is held by acquiring company, when the asset is transferred at book value no special adjustments are needed. But when the asset is transferred at more or less than the book value, the unrealized gain or loss is deferred until the asset is sold to unrelated party. Moreover in the consolidation the gain or loss will be eliminated.

The three-part consolidation worksheet for December 31, 20X9.

Answer 28

d

Expert Solution

Answer to Problem 7.38P

Balance as per three part consolidated work sheet:

Retained earnings $2,649,300, Net assets $6,359,050.

Answer 29

d

Expert Solution

Answer 30

d

Expert Solution

Answer 31

Expert Solution

Answer 32

Explanation of Solution

			Elimination
Items	P	S	Debit $	Credit $	Consolidation
Sales	4,801,000	985,000			5,786,000
Other income	90,000	(35,000)	80,000	40,000	15,000
Less:
Cost of goods sold	(2,193,000)	(525,000)			(2,718,000)
Depreciation expenses	(202,000)	(88,000)	4,000		(294,000)
Other expenses	(1,381,000)	(227,000)		80,000	(1,528,000)
Income from S Corp	109,500		109,500
Consolidated net income					1,261,000
Non-controlling interest			36,500		(36,500)
Net income carry forward	2,649,300	1,490,000	1,630,000	140,000	2,649,300

Retained earnings	1,474,800	1,400,000	1,400,000		1,474,800
Net income	2,649,300	1,490,000	1,630,000	140,000	2,649,300
Less dividends declared	(50,000)	(20,000)		20,000	(50,000)
Retained earnings Dec 31	2,649,300	1,490,000	1,630,000	140,000	2,649,300

Cash	50,700	38,000			88,700
Accounts receivable	101,800	89,400		23,750	167,450
Inventory	286,000	218,900			504,900
Land	400,000	1,200,000	56,000	23,000	1,633,000
Buildings & equipment	2,400,000	2,990,000	185,000		5,575,000
Less: Accumulated Depr.	(1,105,000)	(420,000)		145,000
				4,000	(1,674,000)
Investment in S Corp	2,974,000		23,000	2,907,000
				90,000
Goodwill			64,000		64,000
Total Assets	5,107,500	4,116,300	328,000	2,192,750	6,359,050

Accounts payable	86,200	76,300	23,750		138,750
Bonds payable	1,000,000	200,000			1,200,000
Common stock	100,000	1,000,000	1,000,000		100,000
Additional paid-in capital	1,272,000	1,350,000	1,350,000		1,272,000
Retained earnings	2,649,300	1,490,000	1,630,000	140,000	2,649,300
NCI in Net assets of S				969,000	999,000
				30,000
Total Liabilities & equity	5,107,500	4,116,300	328,000	2,192,750	6,359,050