Acc407 Advanced Accounting: P5-32 Power Corporation acquired 75 percent of Best Company’s ownership
Acc407 Advanced Accounting P5-32 Consolidation Workpaper at End of First Year of Ownership Power Corporation acquired 75 percent of Best Company’s ownership on January 1, 20X8, for $96,000. At that date, the fair value of the noncontrolling interest was $32,000. The book value of Best’s net assets at acquisition was $100,000. The book values and fair values of Best’s assets and liabilities were equal, except for Best’s buildings and equipment, which were worth $20,000 more than book value. Buildings and equipment are depreciated on a 10-year basis. Although goodwill is not amortized, the management of Power concluded at December 31, 20X8, that goodwill from its purchase of Best shares had been impaired and the correct carrying amount was $2,500. Goodwill and goodwill impairment were assigned proportionately to the controlling and noncontrolling shareholders. (Note that Power Company does not adjust its Income from Subsidiary for goodwill impairment under the basic equity method.) Trial balance data for Power and Best on December 31, 20X8, are as follows: Power Corporation Best Company Item Debit Credit Debit Credit Cash 47,500 21,000 Accounts Receivable 70,000 12,000 Inventory 90,000 25,000 Land 30,000 15,000 Buildings and Equipment 350,000 150,000 Investment in Best Co. Stock 100,500 Cost of Goods Sold 125,000 110,000 Wage Expense 42,000 27,000 Depreciation Expense 25,000 10,000 Interest Expense 12,000 4,000 Other Expenses 13,500 5,000 Dividends Declared 30,000 16,000 Accumulated Depreciation 145,000 40,000 Accounts Payable 45,000 16,000 Wages Payable 17,000 9,000 Notes Payable 150,000 50,000 Common Stock 200,000 60,000 Retained Earnings 102,000 40,000 Sales 260,000 180,000 Income from Subsidiary 16,500 $935,500 $935,500 $395,000 $395,000 Required a. Give all eliminating entries needed to prepare a three-part consolidation workpaper as of December 31, 20X8. b. Prepare a three-part consolidation workpaper for 20X8 in good form.
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