P5-36 Consolidation Workpaper at End of First Year of Ownership
Power Corporation acquired 75 percent of Best Company's ownership on January 1, 20X8, for $96,000.
At that date, the fair value of Best's buildings and equipment was $20,000 more than book value. Buildings and equipment are depreciated on a 10-year basis. Although goodwill is not amortized, the management of Power concluded at December 31, 20X8, that goodwill involved in its purchase of Best shares had been impaired and the correct carrying value was $2,500.
Trial balance data for Power and Best on December 31, 20X8, are as follows:
Power Corporation Best Company
Item Debit Credit Debit Credit
Cash $47,500 $21,000
Accounts Receivable 70,000 12,000
Inventory 90,000 25,000
Land 30,000 15,000
Buildings and Equipment 350,000 150,000
Investment in Best Co. Stock 100,500
Cost of Goods Sold 125,000 110,000
Wage Expense 4,200 27,000
Depreciation Expense 25,000 10,000
Interest Expense 12,000 4,000
Other Expenses 13,500 5,000
Dividends Declared 30,000 16,000
Accumulated Depreciation $145,000 $40,000
Accounts Payable 45,000 16,000
Wages Payable 17,000 9,000
Notes Payable 150,000 50,000
Common Stock 200,000 60,000
Retained Earnings 102,000 40,000
Sales 260,000 180,000
Income from Subsidiary 16,500
$897,700 $935,500 $395,000 $395,000
a. Give all eliminating entries needed to prepare a three-part consolidation workpaper as of December 31, 2008
b. Prepare a three-part consolidation workpaper for 20X8 in good form.
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