On January 1, 2022, Allan Company acquired 80 percent of Bond Company. Of Bond's total business fair value, $135,000 was allocated to copyrights with a 20-year remaining life. Subsequently, on January 1, 2023, Bond obtained 70 percent of Cole Company's outstanding voting shares. In this second acquisition, $126,000 of Cole's total business fair value was assigned to copyrights that had a remaining life of 12 years. Bond's book value was $642,500 on January 1, 2022, and Cole reported a book value of $157,000 on January 1, 2023. Bond has made numerous inventory transfers to Allan since the business combination was formed. Intra-entity gross profits of $25,000 were present in Allan's inventory as of January 1, 2024. During the year, $220,000 in additional intra-entity sales were made with $24,200 in Intra-entity gross profits in inventory remaining at the end of the period. Both Allan and Bond utilized the equity method to account for their investment balances. Following are the individual financial statements for the companies for 2024 with consolidated totals Accounts Allan Company Bond Company Cole Company Consolidated Totals Sales $ (950,000) $ (520,000) $ (302,500) $ (1,552,500) Cost of goods sold 520,000 250,000 142,000 691,200 Operating expenses 299,000 134,000 90,000 540,250 Income of subsidiary (137,640) (42,000) 0 0 Separate company net income $ (268,640) $ (178,000) $ (70,500) Consolidated net income $ (321,050) Net income attributable to noncontrolling interest (Bond Company) 34,410 Net income attributable to noncontrolling interest (Cole Company) 18,000 Net income attributable to Allan Company $ (268,640) Retained earnings, 1/1/24 $ (592,400) $ (552,500) $ (117,000) $ (592,400) Net income (above) (268,640) (178,000) (70,500) (268,640) Dividends declared 50,000 40,000 50,000 50,000 Retained earnings, 12/31/24 $ (811,040) $ (690,500) $ (137,500) $ (811,040) Cash and receivables $ 175,200 $ 245,750 $ 60,500 $ 481,450 Inventory 295,000 515,000 225,000 1,010,800 Investment in Bond Company 720,840 0 0 0 Investment in Cole Company 0 239,750 0 0 Property, plant, and equipment 440,000 342,500 291,000 1,073,500 Copyrights 0 0 0 219,750 Total assets $ 1,631,040 $ 1,343,000 $ 576,500 $ 2,785,500 Liabilities $ (620,000) $ (532,500) $ (339,000) $ (1,491,500) Common stock (200,000) (120,000) (100,000) (200,000) Retained earnings, 12/31/24 (811,040) (690,500) (137,500) (811,040) Noncontrolling interest in Bond Company, 12/31/24 0 0 0 (180,210) Noncontrolling interest in Cole Company, 12/31/24 0 0 0 (102,750) Total liabilities and equities $ (1,631,040) $ (1,343,000) $ (576,500) $ (2,785,500) Note: Parentheses indicate a credit balance. Required: Develop the worksheet entries necessary to derive these reported balances:
On January 1, 2022, Allan Company acquired 80 percent of Bond Company. Of Bond's total business fair value, $135,000 was allocated to copyrights with a 20-year remaining life. Subsequently, on January 1, 2023, Bond obtained 70 percent of Cole Company's outstanding voting shares. In this second acquisition, $126,000 of Cole's total business fair value was assigned to copyrights that had a remaining life of 12 years. Bond's book value was $642,500 on January 1, 2022, and Cole reported a book value of $157,000 on January 1, 2023. Bond has made numerous inventory transfers to Allan since the business combination was formed. Intra-entity gross profits of $25,000 were present in Allan's inventory as of January 1, 2024. During the year, $220,000 in additional intra-entity sales were made with $24,200 in Intra-entity gross profits in inventory remaining at the end of the period. Both Allan and Bond utilized the equity method to account for their investment balances. Following are the individual financial statements for the companies for 2024 with consolidated totals Accounts Allan Company Bond Company Cole Company Consolidated Totals Sales $ (950,000) $ (520,000) $ (302,500) $ (1,552,500) Cost of goods sold 520,000 250,000 142,000 691,200 Operating expenses 299,000 134,000 90,000 540,250 Income of subsidiary (137,640) (42,000) 0 0 Separate company net income $ (268,640) $ (178,000) $ (70,500) Consolidated net income $ (321,050) Net income attributable to noncontrolling interest (Bond Company) 34,410 Net income attributable to noncontrolling interest (Cole Company) 18,000 Net income attributable to Allan Company $ (268,640) Retained earnings, 1/1/24 $ (592,400) $ (552,500) $ (117,000) $ (592,400) Net income (above) (268,640) (178,000) (70,500) (268,640) Dividends declared 50,000 40,000 50,000 50,000 Retained earnings, 12/31/24 $ (811,040) $ (690,500) $ (137,500) $ (811,040) Cash and receivables $ 175,200 $ 245,750 $ 60,500 $ 481,450 Inventory 295,000 515,000 225,000 1,010,800 Investment in Bond Company 720,840 0 0 0 Investment in Cole Company 0 239,750 0 0 Property, plant, and equipment 440,000 342,500 291,000 1,073,500 Copyrights 0 0 0 219,750 Total assets $ 1,631,040 $ 1,343,000 $ 576,500 $ 2,785,500 Liabilities $ (620,000) $ (532,500) $ (339,000) $ (1,491,500) Common stock (200,000) (120,000) (100,000) (200,000) Retained earnings, 12/31/24 (811,040) (690,500) (137,500) (811,040) Noncontrolling interest in Bond Company, 12/31/24 0 0 0 (180,210) Noncontrolling interest in Cole Company, 12/31/24 0 0 0 (102,750) Total liabilities and equities $ (1,631,040) $ (1,343,000) $ (576,500) $ (2,785,500) Note: Parentheses indicate a credit balance. Required: Develop the worksheet entries necessary to derive these reported balances:
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 8MC
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On January 1, 2022, Allan Company acquired 80 percent of Bond Company. Of Bond's total business fair value, $135,000 was allocated to copyrights with a 20-year remaining life. Subsequently, on January 1, 2023, Bond obtained 70 percent of Cole Company's outstanding voting shares. In this second acquisition, $126,000 of Cole's total business fair value was assigned to copyrights that had a remaining life of 12 years. Bond's book value was $642,500 on January 1, 2022, and Cole reported a book value of $157,000 on January 1, 2023.
Bond has made numerous inventory transfers to Allan since the business combination was formed. Intra-entity gross profits of $25,000 were present in Allan's inventory as of January 1, 2024. During the year, $220,000 in additional intra-entity sales were made with $24,200 in Intra-entity gross profits in inventory remaining at the end of the period.
Both Allan and Bond utilized the equity method to account for their investment balances.
Following are the individual financial statements for the companies for 2024 with consolidated totals
| Accounts | Allan Company | Bond Company | Cole Company | Consolidated Totals |
|---|---|---|---|---|
| Sales | $ (950,000) | $ (520,000) | $ (302,500) | $ (1,552,500) |
| Cost of goods sold | 520,000 | 250,000 | 142,000 | 691,200 |
| Operating expenses | 299,000 | 134,000 | 90,000 | 540,250 |
| Income of subsidiary | (137,640) | (42,000) | 0 | 0 |
| Separate company net income | $ (268,640) | $ (178,000) | $ (70,500) | |
| Consolidated net income | $ (321,050) | |||
| Net income attributable to noncontrolling interest (Bond Company) | 34,410 | |||
| Net income attributable to noncontrolling interest (Cole Company) | 18,000 | |||
| Net income attributable to Allan Company | $ (268,640) | |||
| Retained earnings, 1/1/24 | $ (592,400) | $ (552,500) | $ (117,000) | $ (592,400) |
| Net income (above) | (268,640) | (178,000) | (70,500) | (268,640) |
| Dividends declared | 50,000 | 40,000 | 50,000 | 50,000 |
| Retained earnings, 12/31/24 | $ (811,040) | $ (690,500) | $ (137,500) | $ (811,040) |
| Cash and receivables | $ 175,200 | $ 245,750 | $ 60,500 | $ 481,450 |
| Inventory | 295,000 | 515,000 | 225,000 | 1,010,800 |
| Investment in Bond Company | 720,840 | 0 | 0 | 0 |
| Investment in Cole Company | 0 | 239,750 | 0 | 0 |
| Property, plant, and equipment | 440,000 | 342,500 | 291,000 | 1,073,500 |
| Copyrights | 0 | 0 | 0 | 219,750 |
| Total assets | $ 1,631,040 | $ 1,343,000 | $ 576,500 | $ 2,785,500 |
| Liabilities | $ (620,000) | $ (532,500) | $ (339,000) | $ (1,491,500) |
| Common stock | (200,000) | (120,000) | (100,000) | (200,000) |
| Retained earnings, 12/31/24 | (811,040) | (690,500) | (137,500) | (811,040) |
| Noncontrolling interest in Bond Company, 12/31/24 | 0 | 0 | 0 | (180,210) |
| Noncontrolling interest in Cole Company, 12/31/24 | 0 | 0 | 0 | (102,750) |
| Total liabilities and equities | $ (1,631,040) | $ (1,343,000) | $ (576,500) | $ (2,785,500) |
Note: Parentheses indicate a credit balance.
Required:
Develop the worksheet entries necessary to derive these reported balances:
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