Section IV: Business Consolidations (50 points Following are the account balance
ID: 2594475 • Letter: S
Question
Section IV: Business Consolidations (50 points Following are the account balances of Lewis Enterprises and Tucker Corporation as of December 31 2016. Lewis Enterprises Debit Tucker Debit ration Credit Credit Item Cash Accounts Receivable Inventory Investment in Tucker Corporation Land Buildings &Equipment; Cost of Goods Sold Depreciation Expense Operating Expense Interest Expense Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Wages Payable Notes Payable Common Stock Retained Earnings Sales Income from Subsidiary 47,500 70,000 9030 96,375 0,000 350,000 125,000 25,000 2,000 12,000 13,500 0,000 21,000 9,000 28,000 15,000 150,000 110,000 10,000 27,000 4,000 5,000 16,000 145,000 40,000 22,000 150,000 200,000 102,000 260,000 375 931,375 0,000 16,000 9,000 50,000 60,000 0,000 180,000 931,375 95,000 Lewis Enterprise acquired 75% of Tucker Corporation's ownership on January 1, 2016 for $96,000. At that date, the fair value of the non-controlling interest was $32,000. The book value of Tucker's net assets at acquisition was $100,000. The book values and fair values of Tucker's assets were equal except for Tucker's Building and Equipment, which was worth $20,000 more than the book value Buidings and equipment are depreciated on a 10 year basis. Using the equity method, prepare the necessary eliminating entries and a consolidating worksheet in Microsoft Excel that Lewis will make if Tucker retains separate legal incorporation and maintain its own accounting systems.Explanation / Answer
Company A Company B Company B (75%) Combined Consolidated (1) (2) (3)= 1+2 Assets Cash $ 47,500 $ 21,000 $ 15,750 $ 63,250 $ 63,250 Receivable $ 70,000 $ 9,000 $ 6,750 $ 76,750 $ 76,750 Inventory $ 90,000 $ 28,000 $ 21,000 $ 111,000 $ 111,000 Investment in Company B $ 96,375 $ - $ 96,375 land $ 30,000 $ 15,000 $ 11,250 $ 41,250 $ 41,250 Building & Equipment $ 350,000 $ 150,000 $ 112,500 $ 462,500 $ 482,500 Total Assets $ 683,875 $ 223,000 $ 167,250 $ 851,125 $ 774,750 Liabilities Acc dep $ 145,000 $ 40,000 $ 30,000 $ 175,000 $ 177,000 Accounts Payble $ 40,000 $ 16,000 $ 12,000 $ 52,000 $ 52,000 Wages Payble $ 22,000 $ 9,000 $ 6,750 $ 28,750 $ 28,750 Notes payble $ 150,000 $ 50,000 $ 37,500 $ 187,500 $ 187,500 Common Stock $ 200,000 $ 60,000 $ 45,000 $ 245,000 $ 200,000 Retained Earnings $ 102,000 $ 40,000 $ 30,000 $ 132,000 $ 102,000 Increase in retained earnings $ 24,875 $ 8,000 $ 6,000 $ 30,875 $ 27,500 Total Liabilities $ 683,875 $ 223,000 $ 167,250 $ 851,125 $ 774,750 Income Statement Sales $ 260,000 $ 180,000 $ 135,000 $ 395,000 $ 395,000 Income from Subsidiary $ 12,375 $ 12,375 $ 272,375 $ 180,000 $ 135,000 $ 407,375 $ 395,000 Expense Cost of Goods Sold $ 125,000 $ 110,000 $ 82,500 $ 207,500 $ 207,500 Dep. $ 25,000 $ 10,000 $ 7,500 $ 32,500 $ 32,500 Operation Expense $ 42,000 $ 27,000 $ 20,250 $ 62,250 $ 62,250 Interest $ 12,000 $ 4,000 $ 3,000 $ 15,000 $ 15,000 Other Expense $ 13,500 $ 5,000 $ 3,750 $ 17,250 $ 17,250 $ 217,500 $ 156,000 $ 117,000 $ 334,500 $ 334,500 Net Income $ 54,875 $ 24,000 $ 18,000 $ 72,875 $ 60,500 Dividend Declared $ 30,000 $ 16,000 $ 12,000 $ 42,000 $ 33,000 Increase in retained Earnings $ 24,875 $ 8,000 $ 6,000 $ 30,875 $ 27,500 Working Notes :- 1) Eliminating the parent's Company Investment Account Common Stock (Company B) $ 45,000 Retained Earnings $ 39,000 Equity in earnings in Company B $ 12,375 Investment in Stock of Company B $ 96,375 2) Adjustment in Fair Value of Building & Equipment Increase in Value $ 20,000 Life 10 years Dep for 1 year $ 2,000