Maurice Tutor
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On January 1, 2009, Alpha acquired 80 percent of Delta. Of Delta’s total business fair value, $125,000 was allocated to copyrights with a 20-year remaining life. Subsequently, on January 1, 2010, Delta obtained 70 percent of Omega’s outstanding voting shares. In this second acquisition, $120,000 of Omega’s total business fair value was assigned to copyrights that had a remaining life of 12 years. Delta’s book value was $490,000 on January 1, 2009, and Omega reported a book value of $140,000 on January 1, 2010.
Delta has made numerous inventory transfers to Alpha since the business combination was formed. Unrealized gains of $15,000 were present in Alpha’s inventory as of January 1, 2011. During the year, $200,000 in additional intra-entity sales were made with $22,000 in gains remaining unrealized at the end of the period. Both Alpha and Delta utilized the partial equity method to account for their investment balances.
Following are the individual financial statements for the companies for 2011 with consolidated totals. Develop the worksheet entries necessary to derive these reported balances:
|
Alpha Company |
Delta Company |
Omega Company |
Consolidated Totals |
|
|
Sales |
($900,000) |
($500,000) |
200000 |
($1,400,000) |
|
Cost of goods sold |
500,000 |
240,000 |
80000 |
627,000 |
|
Operating expenses |
294,000 |
129,000 |
50000 |
489,250 |
|
Income of subsidiary |
144,000 |
49,000 |
–0– |
–0– |
|
Separate company net income |
($250,000) |
($180,000) |
70000 |
|
|
Consolidated net income |
($283,750) |
|||
|
Noncontrolling interest in income of Delta Company |
31,950 |
|||
|
Noncontrolling interest in income of Omega Company |
18,000 |
|||
|
Controlling interest in consolidated net income |
($233,800) |
|||
|
Retained earnings, 1/1/11 |
($600,000) |
($400,000) |
($100,000) |
($572,400) |
|
Net income (above) |
250,000 |
180,000 |
70,000 |
233,800 |
|
Dividends paid |
50,000 |
40,000 |
50,000 |
50,000 |
|
Retained earnings, 12/31/11 |
($800,000) |
($540,000) |
($120,000) |
($756,200) |
|
Cash and receivables |
$262,000 |
$206,000 |
$70,000 |
$538,000 |
|
Inventory |
290,000 |
310,000 |
160,000 |
738,000 |
|
Investment in Delta Company |
628,000 |
–0– |
–0– |
–0– |
|
Investment in Omega Company |
–0– |
238,000 |
–0– |
–0– |
|
Property, plant, and equipment |
420,000 |
316,000 |
270,000 |
1,006,000 |
|
Copyrights |
–0– |
–0– |
–0– |
206,250 |
|
Total assets |
$1,600,000 |
$1,070,000 |
$500,000 |
$2,488,250 |
|
Liabilities |
($600,000) |
($410,000) |
($280,000) |
($1,290,000) |
|
Common stock |
200,000 |
120,000 |
100,000 |
200,000 |
|
Retained earnings, 12/31/11 |
800,000 |
540,000 |
120,000 |
756,200 |
|
Noncontrolling interest in Delta Company, 12/31/11 |
–0– |
–0– |
–0– |
146,050 |
|
Noncontrolling interest in Omega Company, 12/31/11 |
–0– |
–0– |
–0– |
96,000 |
|
Total liabilities and equities |
($1,600,000) |
($1,070,000) |
($500,000) |
($2,488,250) |
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