Following are the individual financial statements for Gibson and Davis for the y

Question

Following are the individual financial statements for Gibson and Davis for the year ending December 31, 2018 Gibson Davis Sales Cost of goods sold Operating expenses Dividend income 772,000) $ 317,000 231,000 18,000 (242,000) (409,500) 225,000 80,500 Net income (104,000) Retained earnings, 1/1/18 Net income Dividends declared 728,000) (242,000) 50,000 920,000) (494,000) (104,000) 30,000 (568,000) Retained earnings, 12/31/18 Cash and receivables Inventory Investment in Davis Buildings (net) Equipment (net) 204,800 551,000 622,200 591,000 462,000 216,000 198,000 617,00 439,000 $2,431,000 $ 1,470,000 Total assets Liabilities Common stochk Retained earnings, 12/31/18 (881,000) (630,000) (562,000) (340,000) (920,000)(568,000) $ (2,431,000) 1,470,000) Total liabilities and stockholders equity Gibson acquired 60 percent of Davis on April 1, 2018, for $622,200. On that date, equipment owned by Davis (with a five-year remaining life) was overvalued by $48,000. Also on that date, the fair value of the 40 percent noncontrolling interest was $414,800. Davis earned income evenly during the year but declared the $40,000 dividend on November 1, 2018 a. Prepare a consolidated income statement for the year ending December 31, 2018 b. Determine the consolidated balance for each of the following accounts as of December 31, 2018 Goodwill Equipment (net) Common stock Buildings (net) Dividends declared

Explanation / Answer

a.

Amortisation of excess of fair value of equipment.

Excess fair value= 48000

depreciation per year= 48000/5= 9600

depreciation for 9 months= 9600*9/12= 7200

b.

Good will: on acquisition

Good will amount will not change at year end.

b. Equipment=

Common stock= 630000. subsidiary amount is eliminated in consolidation

Buildings= 591000+617000= 1208000

Dividends declared=

Particulars Gibson Davis Adjustments Total Sales        -772,000        -409,500         -1,181,500 Cost of goods sold          317,000          225,000              542,000 Operating expenses          231,000            80,500                7,200              318,700 Dividend income           -18,000                      -                18,000                          -   Net income        -242,000        -104,000              25,200            -320,800

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