Equity method, later period, vertical worksheet, several excess adjustments. Booker Enterprises purchased an 80% interest in Kobe International for $850,000 on January 1, 20X5. Booker Enterprises also paid $4,000 in direct acquisition costs. On the purchase date, Kobe International had the following stockholders’ equity:
|
Common stock ($10 par) |
$150,000 |
|
Paid in capital in excess of par |
200,000 |
|
Retained earnings |
400,000 |
|
$750,000 |
Also on the purchase date, it was determined that Kobe International’s assets were understated as follows:
|
Equipment, 10 year remaining life |
$80,000 |
|
Land |
20,000 |
|
Building, 20 year remaining life |
60,000 |
The remaining excess of cost over book value was attributed to goodwill. The following summarized statements of Booker Enterprises and Kobe International are for the year ended December 31, 20X7:
|
Booker Enterprises |
Kobe International |
|
|
Income Statements: |
||
|
Sales |
650,000 |
320,000 |
|
Cost of Goods Sold |
260,000 |
240,000 |
|
Operating Expenses |
170,000 |
70,000 |
|
Depreciation Expense |
65,000 |
30,000 |
|
Subsidiary (Income)/Loss |
16,000 |
|
|
Net (Income)/Loss |
139,000 |
20,000 |
|
Retained Earnings: |
||
|
Retained Earnings, Jan 1, 20X7, Booker |
625,000 |
|
|
Retained Earnings, Jan 1, 20X7, Kobe |
460,000 |
|
|
Net (Income)/Loss |
139,000 |
20,000 |
|
Dividends Declared |
10,000 |
|
|
Retained Earnings, Dec 31, 20X7 |
764,000 |
430,000 |
|
Balance Sheets: |
||
|
Cash |
334,000 |
170,000 |
|
Inventory |
135,000 |
400,000 |
|
Land |
145,000 |
150,000 |
|
Buildings |
900,000 |
500,000 |
|
Accum Depreciation—Building |
345,000 |
360,000 |
|
Equipment |
350,000 |
250,000 |
|
Accum Depreciation—Equipment |
135,000 |
90,000 |
|
Investment in Kobe International |
828,000 |
|
|
Liabilities |
248,000 |
40,000 |
|
Balance Sheets (cont’d): |
||
|
Bonds Payable |
200,000 |
|
|
Common Stock, Booker |
1,200,000 |
|
|
Common Stock, Kobe |
150,000 |
|
|
Paid In Capital in Excess of Par |
200,000 |
|
|
Retained Earnings, Dec 31, 20X7 |
764,000 |
430,000 |
|
Balance |
0 |
0 |
Required
Using the vertical format, prepare a consolidated worksheet for December 31, 20X7. Precede the worksheet with a determination and distribution of excess schedule. Include income distribution schedules to allocate the consolidated net income to the noncontrolling and controlling interests.
Suggestion: Remember that all adjustments to retained earnings are to beginning retained earnings, and it is the beginning balance of the subsidiary retained earnings account which is subject to elimination. Carefully follow the “carrydown” procedure to calculate the ending retained earnings balances.