Following are selected accounts for Mergaronite Company andHill, Inc., as of December 31, 2018. Several of Mergaroniteâsaccounts have been omitted. Credit balances are indicated byparentheses. Dividends were declared and paid in the sameperiod.
Mergaronite Hill Revenues $ (602,000 ) $ (240,000 ) Cost of goods sold 260,000 114,000 Depreciation expense 120,000 44,000 Investment income NA NA Retained earnings, 1/1/18 (892,000 ) (602,000 ) Dividends declared 120,000 44,000 Current assets 200,000 662,000 Land 318,000 94,000 Buildings (net) 500,000 140,000 Equipment (net) 194,000 248,000 Liabilities (390,000 ) (320,000 ) Common stock (294,000 ) (36,000 ) Additional paid-in capital (54,000 ) (908,000 )
Assume that Mergaronite took over Hill on January 1, 2014, byissuing 7,600 shares of common stock having a par value of $10 pershare but a fair value of $100 each. On January 1, 2014, Hillâsland was undervalued by $19,800, its buildings were overvalued by$29,200, and equipment was undervalued by $61,800. The buildingshad a 10-year remaining life; the equipment had a 5-year remaininglife. A customer list with an appraised value of $94,000 wasdeveloped internally by Hill and was to be written off over a20-year period.
A.) Determine the December 31, 2018, consolidatedtotals for the following accounts:
Totals Revenues $ Cost of goods sold $ Depreciation expense $ Amortization expense $ Buildings $ Equipment $ Customer list $ Common stock $ Additional paid-in capital $
B.) In requirement (a), can the consolidated totalsbe determined without knowing which method the parent used toaccount for the subsidiary?
Consolidated totals
C.) If the parent uses the equity method, whatconsolidation entries would be used on a 2018worksheet?
Prepare Entry S to eliminate the beginning stockholders' equityof the subsidiary.
Event Account Debit Credit S
Prepare Entry A to recognize the unamortized allocation balancesas of the beginning of the current year.
Event Account Debit Credit A
Prepare Entry I to remove the equity income recognized duringthe year - equity method.
Event Account Debit Credit I
Prepare Entry D to remove the Intra-entity dividenddeclarations.
Event Account Debit Credit D
Prepare Entry E to recognize the excess acquisition-datefair-value amortizations for the period.
Event Account Debit Credit E
Following are selected accounts for Mergaronite Company andHill, Inc., as of December 31, 2018. Several of Mergaroniteâsaccounts have been omitted. Credit balances are indicated byparentheses. Dividends were declared and paid in the sameperiod.
| Mergaronite | Hill | ||||||||
| Revenues | $ | (602,000 | ) | $ | (240,000 | ) | |||
| Cost of goods sold | 260,000 | 114,000 | |||||||
| Depreciation expense | 120,000 | 44,000 | |||||||
| Investment income | NA | NA | |||||||
| Retained earnings, 1/1/18 | (892,000 | ) | (602,000 | ) | |||||
| Dividends declared | 120,000 | 44,000 | |||||||
| Current assets | 200,000 | 662,000 | |||||||
| Land | 318,000 | 94,000 | |||||||
| Buildings (net) | 500,000 | 140,000 | |||||||
| Equipment (net) | 194,000 | 248,000 | |||||||
| Liabilities | (390,000 | ) | (320,000 | ) | |||||
| Common stock | (294,000 | ) | (36,000 | ) | |||||
| Additional paid-in capital | (54,000 | ) | (908,000 | ) | |||||
Assume that Mergaronite took over Hill on January 1, 2014, byissuing 7,600 shares of common stock having a par value of $10 pershare but a fair value of $100 each. On January 1, 2014, Hillâsland was undervalued by $19,800, its buildings were overvalued by$29,200, and equipment was undervalued by $61,800. The buildingshad a 10-year remaining life; the equipment had a 5-year remaininglife. A customer list with an appraised value of $94,000 wasdeveloped internally by Hill and was to be written off over a20-year period.
A.) Determine the December 31, 2018, consolidatedtotals for the following accounts:
|
B.) In requirement (a), can the consolidated totalsbe determined without knowing which method the parent used toaccount for the subsidiary?
|
C.) If the parent uses the equity method, whatconsolidation entries would be used on a 2018worksheet?
Prepare Entry S to eliminate the beginning stockholders' equityof the subsidiary.
|
Prepare Entry A to recognize the unamortized allocation balancesas of the beginning of the current year.
|
Prepare Entry I to remove the equity income recognized duringthe year - equity method.
Prepare Entry D to remove the Intra-entity dividenddeclarations.
Prepare Entry E to recognize the excess acquisition-datefair-value amortizations for the period.
|
