Giant acquired all of Small's common stock on January 1, 2017, in exchange for cash of $770,000. On that day, Small reported common stock of $170,000 and retained earnings of $400,000. At the acquisition date, $32,500 of the fair-value price was attributed to undervalued land while $95,500 was assigned to undervalued equipment having a 10-year remaining life. The $72,000 unallocated portion of the acquisition-date excess fair value over book value was viewed as goodwill. Over the next few years, Giant applied the equity method to the recording of this investment. The following are individual financial statements for the year ending December 31, 2021. On that date, Small owes Giant $11,900. Small declared and paid dividends in the same period. Credits are indicated by parentheses. Revenues Cost of goods sold Depreciation expense Equity in income of Small Net income Retained earnings, 1/1/21 Net income (above) Dividends declared Retained earnings, 12/31/21 Current assets Investment in Small Land Buildings (net) Equipment (net) Goodwill Total assets Liabilities Common stock Retained earnings (above) Total liabilities and equities Giant $ (1,183,550) $ 583,000 187,000 (206,450) $ (620,000) $ $ (1,720,000) $ (620,000) 310,000 $ (2,030,000) $ $ 439,750 $ 1,060, 250 526,000 390,000 739,000 0 $ 3,155,000 $ Small (462,500) 98,500 148,000 0 (216,000) (642,000) (216,000) 120,000 (738,000) 334,000 0 260,000 432,000 294,000 0 $ 1,320,000 (875,000) $ (412,000) (250,000) (2,030,000) (170,000) (738,000) $ (3,155,000) $ (1,320,000)
Giant acquired all of Small's common stock on January 1, 2017, in exchange for cash of $770,000. On that day, Small reported common stock of $170,000 and retained earnings of $400,000. At the acquisition date, $32,500 of the fair-value price was attributed to undervalued land while $95,500 was assigned to undervalued equipment having a 10-year remaining life. The $72,000 unallocated portion of the acquisition-date excess fair value over book value was viewed as goodwill. Over the next few years, Giant applied the equity method to the recording of this investment. The following are individual financial statements for the year ending December 31, 2021. On that date, Small owes Giant $11,900. Small declared and paid dividends in the same period. Credits are indicated by parentheses. Revenues Cost of goods sold Depreciation expense Equity in income of Small Net income Retained earnings, 1/1/21 Net income (above) Dividends declared Retained earnings, 12/31/21 Current assets Investment in Small Land Buildings (net) Equipment (net) Goodwill Total assets Liabilities Common stock Retained earnings (above) Total liabilities and equities Giant $ (1,183,550) $ 583,000 187,000 (206,450) $ (620,000) $ $ (1,720,000) $ (620,000) 310,000 $ (2,030,000) $ $ 439,750 $ 1,060, 250 526,000 390,000 739,000 0 $ 3,155,000 $ Small (462,500) 98,500 148,000 0 (216,000) (642,000) (216,000) 120,000 (738,000) 334,000 0 260,000 432,000 294,000 0 $ 1,320,000 (875,000) $ (412,000) (250,000) (2,030,000) (170,000) (738,000) $ (3,155,000) $ (1,320,000)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
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Transcribed Image Text:Giant acquired all of Small's common stock on January 1, 2017, in exchange for cash of $770,000. On that day, Small reported common
stock of $170,000 and retained earnings of $400,000. At the acquisition date, $32,500 of the fair-value price was attributed to
undervalued land while $95,500 was assigned to undervalued equipment having a 10-year remaining life. The $72,000 unallocated
portion of the acquisition-date excess fair value over book value was viewed as goodwill. Over the next few years, Giant applied the
equity method to the recording of this investment.
The following are individual financial statements for the year ending December 31, 2021. On that date, Small owes Giant $11,900. Small
declared and paid dividends in the same period. Credits are indicated by parentheses.
Revenues
Cost of goods sold
Depreciation expense
Equity in income of Small
Net income
Retained earnings, 1/1/21
Net income (above)
Dividends declared
Retained earnings, 12/31/21
Current assets
Investment in Small
Land
Buildings (net)
Equipment (net)
Goodwill
Total assets
Liabilities
Common stock
Retained earnings (above)
Total liabilities and equities
Giant
$ (1,183,550) $
583,000
187,000
(206,450)
(620,000) $
$
$ (1,720,000) $
(620,000)
310,000
$ (2,030,000) $
$
$
$
439,750 $
1,060,250
526,000
390,000
739,000
0
Small
(462,500)
98,500
148,000
0
(216,000)
(642,000)
(216,000)
120,000
(738,000)
334,000
0
260,000
432,000
294,000
0
3,155,000 $ 1,320,000
(875,000) $
(250,000)
(412,000)
(170,000)
(738,000)
(2,030,000)
$ (3,155,000) $ (1,320,000)
Transcribed Image Text:Prepare a consolidation worksheet for Giant and Small for the year ending December 31, 2021. (For accounts where multiple
consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the
worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.
Amounts in the Debit and Credit columns should be entered as positive. Input all amounts as positive values.)
Accounts
Revenues
Cost of goods sold
Depreciation expense
Equity income of Small
Net income
Retained earning, 1/1/21
Net income (above)
Dividends declared
Retained earnings, 12/31/21
Current assets
Investment in Small
Land
Buildings (net)
Equipment (net)
Goodwill
Total assets
Liabilities
Common stock
Retained earnings (above)
Total liabilities and equity
GIANT COMPANY AND SMALL COMPANY
Consolidation Worksheet
For Year Ending December 31, 2021
$
(1,183,550)
583,000
187,000-
(206,450)
$ (620,000)
$
Giant
(1,720,000)
(620,000)
310,000
$
(2,030,000)
$ 439,750
1,060,250-
526,000
390,000
739,000
$ 3,155,000
$ (875,000)
(250,000)
(2,030,000)
(3.155.000)
$
Small
$ (462,500)
98,500
148,000
0
$(216,000)
$ (642,000)
(216,000)
120,000
$ (738,000)
$ 334,000
0
260,000
432,000
294.000
0
$1,320,000
$
$ (412,000)
(170,000)
(738,000)
(1,320,000)
Consolidation Entries:
Credit
Debit
9,550
(206,450) X
642,000
120,000
32,500
S8
95,500 X
72,000
11.900
170,000
947.000
940 250 x
47.750 x
Consolidated
Totals
(1,646,050)
(1.720.000)
(620,000)
120,000 $ 310,000
11.900 S
1.119.900
$ (620.000)
681.500
344.550
$ (2.768.000) X
DO
=
$
761.850
818.500
822,000
1,080.750
72,000
$ 3.555.100
(1.275,100)
(250.000)
9999990
(2,768,000)
DOMARTIN
3.555. 100
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