The individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2021, follow. Gibsonacquired a 60 percent interest in Keller on January 1, 2020, in exchange for various considerations totaling $750,000. At theacquisition date, the fair value of the noncontrolling interest was $500,000 and Keller's book value was $1,000,000. Keller haddeveloped internally a customer list that was not recorded on its books but had an acquisition-date fair value of $250,000. Thisintangible asset is being amortized over 20 years. Gibson uses the partial equity method to account for its investment in Keller.Gibson sold Keller land with a book value of $75,000 on January 2, 2020, for $160,000. Keller still holds this land at the end of thecurrent year.Keller regularly transfers inventory to Gibson. In 2020, it shipped inventory costing $180,000 to Gibson at a price of $300,000. During2021, intra-entity shipments totaled $350,000, although the original cost to Keller was only $245,000. In each of these years, 20percent of the merchandise was not resold to outside parties until the period following the transfer. Gibson owes Keller $35,000 at theend of 2021.SalesCost of goods sold.Operating expensesEquity in earnings of KellerNet incomeRetained earnings, 1/1/21Net income (above)Dividends declaredRetained earnings, 12/31/21CashAccounts receivableInventoryInvestment in KellerLandBuildings and equipment (net)Total assetsLiabilitiesCommon stockAdditional paid-in capitalRetained earnings, 12/31/21Total liabilities and equitiesGibsonCompany$ (950,000) $ (650,000)650,000140,000(102,000)450,00030,0000(170,000)$ (262,000) $(695,000)(170,000)45,000(820,000)$(1,266,000) $(262,000)145,000$(1,383,000)$184,000386,000540,000966,000120,000511,000$ 2,707,000$(584,000)(740,000)0(1,383,000)$(2,707,000)KellerCompany$$60,000560,000470,0000540,000450,000$ 2,080,000$ (720,000)(470,000)(70,000)(820,000)$(2,080,000) b. How would the consolidation entries in requirement (a) have differed if Gibson had sold a building on January 2, 2020, with a$135,000 book value (cost of $290,000) to Keller for $250,000 instead of land, as the problem reports? Assume that the buildinghad a 10-year remaining life at the date of transfer.

The process of integrating the financial results of numerous subsidiary firms into the parent…

b. How would the consolidation entries in requirement (a) have differed if Gibson had sold a building on January 2, 2020, with a $135,000 book value (cost of $290,000) to Keller for $250,000 instead of land, as the problem reports? Assume that the building had a 10-year remaining life at the date of transfer.

b. How would the consolidation entries in requirement (a) have differed if Gibson had sold a building on January 2, 2020, with a $135,000 book value (cost of $290,000) to Keller for $250,000 instead of land, as the problem reports? Assume that the building had a 10-year remaining life at the date of transfer.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2021, follow. Gibson acquired a 60 percent interest in Keller on January 1, 2020, in exchange for various considerations totaling $750,000. At the acquisition date, the fair value of the noncontrolling interest was $500,000 and Keller's book value was $1,000,000. Keller had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $250,000. This intangible asset is being amortized over 20 years. Gibson uses the partial equity method to account for its investment in Keller. Gibson sold Keller land with a book value of $75,000 on January 2, 2020, for $160,000. Keller still holds this land at the end of the current year. Keller regularly transfers inventory to Gibson. In 2020, it shipped inventory costing $180,000 to Gibson at a price of $300,000. During 2021, intra-entity shipments totaled $350,000, although the original cost…
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