3. Abbot Company purchased 80% of Costello Company on January 1, 20X1. The purchase price paid was $600,000. On that day, the book value of Costello was $500,000. Excess of cost over book value is due to goodwill. Included in Costello's income are intercompany sales to Abbot of $40,000 with a cost to Costello of $25,000. 30% of this inventory is on hand in the Abbot inventory at December 31, 20X3. In addition, inventory sold at a profit of $5,000 was in the inventory of Abbot at December 31, 20X2. Complete the consolidation worksheet. First, complete the financial statements below. Below are the balances of accounts of Abbot and Costello at December 31, 20X3. Consolidation Entries Consolidated Bal. Abbot Costello Dr. Cr. Sales $50,000 $250,000 Expenses 30,000 150,000 Income from S. 80,400 Income $100,000 NCI Controlling Interest Retained Earnings Jan 1, 10 $700,000 $190,000 Dividends 100,000 0 Retained Earnings Dec 31, 10 $290,000 Cash $120,000 $30,000 Receivables 90,000 70,000 Inventory 100,000 100,000 Equipment (net) 100,000 350,000 Patents 50,000 Investment in Costello 796,400 Goodwill Land 100,000 100,000 Building (net) 120,000 100,000 $1,426,400 $800,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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3. Abbot Company purchased 80% of Costello Company on January 1, 20X1.
The purchase price paid was $600,000. On that day, the book value of Costello
was $500,000. Excess of cost over book value is due to goodwill.

Included in Costello's income are intercompany sales to Abbot of $40,000 with a cost to Costello of $25,000.
30% of this inventory is on hand in the Abbot inventory at December 31, 20X3. In addition, inventory
sold at a profit of $5,000 was in the inventory of Abbot at December 31, 20X2.

Complete the consolidation worksheet. First, complete the financial statements below.

Below are the balances of accounts of Abbot and Costello at December 31, 20X3.
					Consolidation Entries	Consolidated Bal.
			Abbot	Costello	Dr.	Cr.
Sales			$50,000	$250,000
Expenses			30,000	150,000
Income from S.		80,400
Income				$100,000
NCI
Controlling Interest

Retained Earnings Jan 1, 10	$700,000	$190,000
Dividends			100,000	0
Retained Earnings Dec 31, 10		$290,000


Cash			$120,000	$30,000
Receivables		90,000	70,000
Inventory			100,000	100,000
Equipment (net)		100,000	350,000
Patents				50,000
Investment in Costello		796,400


Goodwill
Land			100,000	100,000
Building (net)		120,000	100,000
			$1,426,400	$800,000

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