Cost method, 80% interest, worksheet, statements. Bell Corporation purchased all of the outstanding stock of Stockdon Corporation for $220,000 in cash on January 1, 20X7. On the purchase date, Stockdon Corporation had the following condensed balance sheet:
|
Assets |
Liabilities and Equity |
||
|
Cash |
$60,000 |
Liabilities |
$150,000 |
|
Inventory |
40,000 |
Common stock ($10 par) |
100,000 |
|
Land |
120,000 |
Paid in capital in excess of par |
50,000 |
|
Building (net) |
180,000 |
Retained earnings |
100,000 |
|
Total assets |
$400,000 |
Total liabilities and equity |
$400,000 |
Any excess of book value over cost was attributable to the building, which is currently overstated on Stockdon’s books. All other assets and liabilities have book values equal to fair values. The building has an estimated 10 year life with no salvage value. The trial balances of the two companies on December 31, 20X7, appear as follows:
|
Bell |
Stockdon |
|
|
Cash |
180,000 |
143,000 |
|
Inventory |
60,000 |
30,000 |
|
Land |
120,000 |
120,000 |
|
Buildings (net) |
600,000 |
162,000 |
|
Investment in Stockdon Corp |
220,000 |
|
|
Accounts Payable |
405,000 |
210,000 |
|
Common Stock ($3 par) |
300,000 |
|
|
Common Stock ($10 par) |
100,000 |
|
|
Paid In Capital in Excess of Par |
180,000 |
50,000 |
|
Retained Earnings, Jan 1, 20X7 |
255,000 |
100,000 |
|
Sales |
210,000 |
40,000 |
|
Cost of Goods Sold |
120,000 |
35,000 |
|
Other Expenses |
45,000 |
10,000 |
|
Dividends Declared |
5,000 |
|
|
Total |
0 |
0 |
Required
1. Prepare a determination and distribution of excess schedule for the investment.
2. Prepare the 20X7 consolidated worksheet. Include columns for the eliminations and adjustments, the consolidated income statement, the controlling retained earnings, and the consolidated balance sheet.
3. Prepare the 20X7 consolidated statements, including the income statement, retained earnings statement, and balance sheet.