Problem 7-8 (LO 3, 5) Translate a trial balance and prepare a consolidation work-sheet. Balfour Corporation acquired 100% of Tobac Inc., a foreign corporation, for 33,000,000 FC. The acquisition, which was accounted for as a purchase, occurred on July 1, 20X5, when Tobac’s equity, in FC, was as follows: Common stock. . . . ... . . . . . . . . . . . . . . . . . ... . . 19,000,000 FC Paid-in capital in excess of par . . . . . . . . . . .. . . . . 8,480,000 Retained earnings . ... . . . . . . . . . . . . . . . . . ... . . 2,520,000 Any excess of cost over book value is traceable to equipment which is to be depreciated over 10 years. Balfour uses the simple equity method to account for its investment in Tobac. On April 1, 20X7, Tobac acquired additional equipment costing 4,000,000 FC. Equipment is depreciated by the straight-line method over 10 years. No other equipment had been acquired or disposed of since 20X4. Tobac employs the LIFO inventory method. Ending inventory on December 31, 20X7, consists of the following: Acquired in the 1stquarter of20X4 . . . . . . . . . . . . . . . . 1,000,000 FC Acquired in the 1stquarter of20X5 . . . . . . . . . . . . . . . . 500,000 Acquired in the 1stquarter of20X7 . . . . . . . . . . . . . . . . 6,500,000 The cost of sales is traceable to goods purchased during 20X7 as follows: Acquired uniformly over the last nine months . . . . . . . . . . 23,400,000 FC Acquired in the 1st quarter . .. . . . . . . . . . . . . . . . . . . . . . 4,200,000 Other expenses were incurred evenly over the year. On April 1, 20X7, Tobac borrowed $1,280,000 from the parent company in order to help ±nance the purchase of equipment. The note is due in one year and bears interest at the rate of
