Balance Sheet Consolidation of Majority-Owned Subsidiary

On January 2, 20X8, Total Corporation acquired 75 percent of Ticken Tie Company’s outstanding common stock. In exchange for Ticken Tie’s stock, Total issued bonds payable with a par value of $500,000 and fair value of $510,000 directly to the selling stockholders of Ticken Tie. At that date, the fair value of the noncontrolling interest was $170,000. The two companies continued to operate as separate entities subsequent to the combination.

Immediately prior to the combination, the book values and fair values of the companies’ assets and liabilities were as follows:

Â	Total			Ticken Tie
Â	Book Value	Fair Value	Book Value		Fair Value
Cash	$ 12,000	$ 12,000	$ 9,000		$ 9,000
Receivables	41,000	39,000	31,000		30,000
Allowance for Bad Debts	(2,000)	Â	(1,000)		Â
Inventory	86,000	89,000	68,000		72,000
Land	55,000	200,000	50,000		70,000
Buildings & Equipment	960,000	650,000	670,000		500,000
Accumulated Depreciation	(411,000)	Â	(220,000)		Â
Patent	Â	Â	Â		40,000
Total Assets	$741,000	$990,000	$607,000		$721,000
Current Payables	$ 38,000	$ 38,000	$ 29,000		$ 29,000
Bonds Payable	200,000	210,000	100,000		100,000
Common Stock	300,000	Â	200,000		Â
Additional Paid-in Capital	100,000	Â	130,000		Â
Retained Earnings	103,000	Â	148,000		Â
Total Liabilities & Equity	$741,000	Â	$607,000		Â

At the date of combination, Ticken Tie owed Total $6,000 plus accrued interest of $500 on a shortterm note. Both companies have properly recorded these amounts.

Required

a. Record the business combination on the books of Total Corporation.

b. Present in general journal form all elimination entries needed in a worksheet to prepare a consolidated

balance sheet immediately following the business combination on January 2, 20X8.

c. Prepare and complete a consolidated balance sheet worksheet as of January 2, 20X8, immediately following the business combination.

d. Present a consolidated balance sheet for Total and its subsidiary as of January 2, 20X8.