Mill Corporation acquired 100 percent ownership of Roller Company on January 1, 2018. At that date, the net assets of Roller Company had a book value of $80,000. Also, on the date of acquisition, the fair value of Roller's buildings and equipment was $20,000 more than the book value. Buildings and equipment are depreciated on a 10-year basis. In 2018, Roller reported net income of $50,000 and declared dividends and paid dividends of $22,000. Roller did not issue any new stock since the acquisition. Although goodwill is not amortized, Mill's management concluded at December 31, 2019, before the preparation of the consolidated financial statements, that goodwill involved in its acquisition of Roller shares had been impaired and the correct carrying value was $2,500. Mill uses the equity method to account for the investment in Roller. During 2019, Roller had $12,000 outstanding accounts payable owed to Mill. The unadjusted trial balance data for Mill and Roller on December 31, 2019, are as follows: Item Mill Roller Cash $45,500 $32,000 Accounts Receivable 85,000 14,000 Inventory 97,000 24,000 Land 50,000 25,000 Buildings & Equipment 350,000 150,000 Investment in Roller Co. Stock 152,000 NA Cost of Goods Sold 145,000 114,000 Wage Expense 35,000 20,000 Depreciation Expense 25,000 10,000 Interest Expense 12,000 4,000 Other Expenses 23,000 16,000 Dividends Declared 30,000 20,000 Accumulated Depreciation $170,000 $50,000 Accounts Payable 51,000 15,000 Wages Payable 14,000 6,000 Notes Payable 150,000 50,000 Common Stock 200,000 60,000 Retained Earnings 140,500 ?? Sales 290,000 200,000 Income from Subsidiary ?? NA Required: 1. Prepare the necessary journal entry to record the acquisition transaction on January 1, 2018. 2. Prepare the consolidation worksheet (in proper format) for the year ended December 31, 2019. Show all details including consolidated totals.
Mill Corporation acquired 100 percent ownership of Roller Company on January 1, 2018. At that date, the net assets of Roller Company had a book value of $80,000. Also, on the date of acquisition, the fair value of Roller's buildings and equipment was $20,000 more than the book value. Buildings and equipment are depreciated on a 10-year basis. In 2018, Roller reported net income of $50,000 and declared dividends and paid dividends of $22,000. Roller did not issue any new stock since the acquisition. Although goodwill is not amortized, Mill's management concluded at December 31, 2019, before the preparation of the consolidated financial statements, that goodwill involved in its acquisition of Roller shares had been impaired and the correct carrying value was $2,500. Mill uses the equity method to account for the investment in Roller. During 2019, Roller had $12,000 outstanding accounts payable owed to Mill. The unadjusted trial balance data for Mill and Roller on December 31, 2019, are as follows: Item Mill Roller Cash $45,500 $32,000 Accounts Receivable 85,000 14,000 Inventory 97,000 24,000 Land 50,000 25,000 Buildings & Equipment 350,000 150,000 Investment in Roller Co. Stock 152,000 NA Cost of Goods Sold 145,000 114,000 Wage Expense 35,000 20,000 Depreciation Expense 25,000 10,000 Interest Expense 12,000 4,000 Other Expenses 23,000 16,000 Dividends Declared 30,000 20,000 Accumulated Depreciation $170,000 $50,000 Accounts Payable 51,000 15,000 Wages Payable 14,000 6,000 Notes Payable 150,000 50,000 Common Stock 200,000 60,000 Retained Earnings 140,500 ?? Sales 290,000 200,000 Income from Subsidiary ?? NA Required: 1. Prepare the necessary journal entry to record the acquisition transaction on January 1, 2018. 2. Prepare the consolidation worksheet (in proper format) for the year ended December 31, 2019. Show all details including consolidated totals.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Mill Corporation acquired 100 percent ownership of Roller Company on January 1, 2018. At that date, the net
assets of Roller Company had a book value of $80,000. Also, on the date of acquisition, the fair value of Roller's
buildings and equipment was $20,000 more than the book value. Buildings and equipment are depreciated on a
10-year basis.
In 2018, Roller reported net income of $50,000 and declared dividends and paid dividends of $22,000. Roller did
not issue any new stock since the acquisition.
Although goodwill is not amortized, Mill's management concluded at December 31, 2019, before the preparation
of the consolidated financial statements, that goodwill involved in its acquisition of Roller shares had been
impaired and the correct carrying value was $2,500. Mill uses the equity method to account for the investment
in Roller. During 2019, Roller had $12,000 outstanding accounts payable owed to Mill.
The unadjusted trial balance data for Mill and Roller on December 31, 2019, are as follows:
Item
Mill
Roller
Cash
$45,500
$32,000
Accounts Receivable
85,000
14,000
Inventory
97,000
24,000
Land
50,000
25,000
Buildings & Equipment
350,000
150,000
Investment in Roller Co. Stock
152,000
NA
Cost of Goods Sold
145,000
114,000
Wage Expense
35,000
20,000
Depreciation Expense
25,000
10,000
Interest Expense
12,000
4,000
Other Expenses
23,000
16,000
Dividends Declared
30,000
20,000
Accumulated Depreciation
$170,000
$50,000
Accounts Payable
51,000
15,000
Wages Payable
14,000
6,000
Notes Payable
150,000
50,000
Common Stock
200,000
60,000
Retained Earnings
140,500
??
Sales
290,000
200,000
Income from Subsidiary
??
NA
Required:
1. Prepare the necessary journal entry to record the acquisition transaction on January 1,
2018.
2. Prepare the consolidation worksheet (in proper format) for the year ended December 31,
2019. Show all details including consolidated totals.
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