Following are the individual financial statements for Gibson and Davis for the year ending December 31, 2021:     Gibson   Davis Sales $ (782,000 )   $ (403,000 ) Cost of goods sold   316,000       141,000   Operating expenses   241,000       81,000   Dividend income   (24,000 )     0   Net income $ (249,000 )   $ (181,000 ) Retained earnings, 1/1/21 $ (735,000 )   $ (486,000 ) Net income   (249,000 )     (181,000 ) Dividends declared   60,000       40,000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Following are the individual financial statements for Gibson and Davis for the year ending December 31, 2021:

 

  Gibson   Davis
Sales $ (782,000 )   $ (403,000 )
Cost of goods sold   316,000       141,000  
Operating expenses   241,000       81,000  
Dividend income   (24,000 )     0  
Net income $ (249,000 )   $ (181,000 )
Retained earnings, 1/1/21 $ (735,000 )   $ (486,000 )
Net income   (249,000 )     (181,000 )
Dividends declared   60,000       40,000  
Retained earnings, 12/31/21 $ (924,000 )   $ (627,000 )
Cash and receivables $ 231,850     $ 77,000  
Inventory   533,000       222,000  
Investment in Davis   618,150       0  
Buildings (net)   528,000       692,000  
Equipment (net)   463,000       487,000  
Total assets $ 2,374,000     $ 1,478,000  
Liabilities $ (820,000 )   $ (511,000 )
Common stock   (630,000 )     (340,000 )
Retained earnings, 12/31/21   (924,000 )     (627,000 )
Total liabilities and stockholders' equity $ (2,374,000 )   $ (1,478,000 )
 

 

Gibson acquired 60 percent of Davis on April 1, 2021, for $618,150. On that date, equipment owned by Davis (with a five-year remaining life) was overvalued by $84,000. Also on that date, the fair value of the 40 percent noncontrolling interest was $412,100. Davis earned income evenly during the year but declared the $40,000 dividend on November 1, 2021.

 

  1. Prepare a consolidated income statement for the year ending December 31, 2021.

  2. Determine the consolidated balance for each of the following accounts as of December 31, 2021:

 

  • Goodwill
  • Equipment (net)
  • Common stock
  • Buildings (net)
  • Dividends declared
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