PROVIDE ALL CALCULATIONS USED
Rossman Corporation holds 75 percent of the common stock of Schmid Distributors Inc., purchased on December 31, 20X1, for $2,340,000. At the date of acquisition, Schmid reported common stock with a par value of $1,000,000, additional paid-in capital of $1,350,000, and retained earnings of $620,000. The fair value of the noncontrolling interest at acquisition was $780,000. The differential at acquisition was attributable to the following items:
Inventory (sold in 20X2)
$30,000
Land
56,000
Goodwill
64,000
Total Differential
$150,000
During 20X2, Rossman sold a plot of land that it had purchased several years before to Schmid at a gain of $23,000; Schmid continues to hold the land. In 20X6, Rossman and Schmid entered into a five-year contract under which Rossman provides management consulting services to Schmid on a continuing basis; Schmid pays Rossman a fixed fee of $80,000 per year for these services. At December 31, 20X8, Schmid owed Rossman $20,000 as the final 20X8 quarterly payment under the contract.
On January 2, 20X8, Rossman paid $250,000 to Schmid to purchase equipment that Schmid was then carrying at $290,000. Schmid had purchased that equipment on December 27, 20X2, for $435,000. The equipment is expected to have a total 15-year life and no salvage value. The amount of the differential assigned to goodwill has not been impaired.
At December 31, 20X8, the trial balances for Rossman and Schmid appeared as follows:
............................................................Rossman Corp......................................... Schmid Distributors Inc.
Item
Debit
Credit
Debit
Credit
Cash
50,700
38,000
Current Receivables
101,800
89,400
Inventory
286,000
218,900
Investment in Schmid Stock
2,974,000
Land
400,000
1,200,000
Buildings/Equipment
2,400,000
2,990,000
Cost of Goods Sold
2,193,000
525,000
Depreciation & Amortization
202,000
88,000
Other Expenses
1,381,000
227,000
Dividends Declared
50,000
20,000
Accumulated Depreciation
1,105,000
420,000
Current Payables
86,200
76,300
Bonds Payable
1,000,000
200,000
Common Stock
100,000
1,000,000
Additional Paid-in Capital
1,272,000
1,350,000
Retained Earnings, Jan 1
1,474,800
1,400,000
Sales
4,801,000
985,000
Other Income or Loss
90,000
Income from Schmid
109,500
Total
$10,038,500
$10,038,500
$5,431,300
$5,431,300
As of December 31, 20X8, Schmid had declared but not yet paid its fourth-quarter dividend of $5,000. Both companies use straight-line depreciation and amortization. Rossman uses the fully adjusted equity method to account for its investment in Schmid.
REQUIRED (Provide all calculations used)
a. Compute the amount of the differential as of January 1, 20X8.
b. Verify the balance in Rossmanâs Investment in Schmid Stock account as of December 31, 20X8.
c. Present all elimination entries that would appear in a three-part consolidation worksheet as of December 31, 20X8.
d. Prepare and complete a three-part worksheet for the preparation of consolidated financial statement for 20X8.
PROVIDE ALL CALCULATIONS USED
Rossman Corporation holds 75 percent of the common stock of Schmid Distributors Inc., purchased on December 31, 20X1, for $2,340,000. At the date of acquisition, Schmid reported common stock with a par value of $1,000,000, additional paid-in capital of $1,350,000, and retained earnings of $620,000. The fair value of the noncontrolling interest at acquisition was $780,000. The differential at acquisition was attributable to the following items:
| Inventory (sold in 20X2) | $30,000 |
| Land | 56,000 |
| Goodwill | 64,000 |
| Total Differential | $150,000 |
During 20X2, Rossman sold a plot of land that it had purchased several years before to Schmid at a gain of $23,000; Schmid continues to hold the land. In 20X6, Rossman and Schmid entered into a five-year contract under which Rossman provides management consulting services to Schmid on a continuing basis; Schmid pays Rossman a fixed fee of $80,000 per year for these services. At December 31, 20X8, Schmid owed Rossman $20,000 as the final 20X8 quarterly payment under the contract.
On January 2, 20X8, Rossman paid $250,000 to Schmid to purchase equipment that Schmid was then carrying at $290,000. Schmid had purchased that equipment on December 27, 20X2, for $435,000. The equipment is expected to have a total 15-year life and no salvage value. The amount of the differential assigned to goodwill has not been impaired.
At December 31, 20X8, the trial balances for Rossman and Schmid appeared as follows:
............................................................Rossman Corp......................................... Schmid Distributors Inc.
| Item | Debit | Credit | Debit | Credit |
| Cash | 50,700 | 38,000 | ||
| Current Receivables | 101,800 | 89,400 | ||
| Inventory | 286,000 | 218,900 | ||
| Investment in Schmid Stock | 2,974,000 | |||
| Land | 400,000 | 1,200,000 | ||
| Buildings/Equipment | 2,400,000 | 2,990,000 | ||
| Cost of Goods Sold | 2,193,000 | 525,000 | ||
| Depreciation & Amortization | 202,000 | 88,000 | ||
| Other Expenses | 1,381,000 | 227,000 | ||
| Dividends Declared | 50,000 | 20,000 | ||
| Accumulated Depreciation | 1,105,000 | 420,000 | ||
| Current Payables | 86,200 | 76,300 | ||
| Bonds Payable | 1,000,000 | 200,000 | ||
| Common Stock | 100,000 | 1,000,000 | ||
| Additional Paid-in Capital | 1,272,000 | 1,350,000 | ||
| Retained Earnings, Jan 1 | 1,474,800 | 1,400,000 | ||
| Sales | 4,801,000 | 985,000 | ||
| Other Income or Loss | 90,000 | |||
| Income from Schmid | 109,500 | |||
| Total | $10,038,500 | $10,038,500 | $5,431,300 | $5,431,300 |
As of December 31, 20X8, Schmid had declared but not yet paid its fourth-quarter dividend of $5,000. Both companies use straight-line depreciation and amortization. Rossman uses the fully adjusted equity method to account for its investment in Schmid.
REQUIRED (Provide all calculations used)
a. Compute the amount of the differential as of January 1, 20X8.
b. Verify the balance in Rossmanâs Investment in Schmid Stock account as of December 31, 20X8.
c. Present all elimination entries that would appear in a three-part consolidation worksheet as of December 31, 20X8.
d. Prepare and complete a three-part worksheet for the preparation of consolidated financial statement for 20X8.
