The individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2018, follow. Gibson acquired a 60 percent interest in Keller on January 1, 2017, in exchange for various considerations totaling $570,000. At the acquisition date, the fair value of the noncontrolling interest was $380,000 and Keller’s book value was $850,000. Keller had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $100,000. This intangible asset is being amortized over 20 years. Gibson sold Keller land with a book value of $60,000 on January 2, 2017, for $100,000. Keller still holds this land at the end of the current year. Keller regularly transfers inventory to Gibson. In 2017, it shipped inventory costing $100,000 to Gibson at a price of $150,000. During 2018, intra-entity shipments totaled $200,000, although the original cost to Keller was only $140,000. In each of these years, 20 percent of the merchandise was not resold to outside parties until the period following the transfer. Gibson owes Keller $40,000 at the end of 2018. Gibson Keller Company Company Sales $ (800,000) $ (500,000) Cost of goods sold 500,000 300,000 Operating expenses 100,000 60,000 Income of Keller Company (84,000) - Net income $ (284,000) $ (140,000) Retained earnings, 1/1/18 $ (1,116,000) $ (620,000) Net income (284,000) (140,000) Dividends paid 115,000 60,000 Retained earnings, 12/31/18 $ (1,285,000) $ (700,000) Cash $ 177,000 $ 90,000 Accounts receivable 316,000 410,000 Inventory 440,000 320,000 Investment in Keller Company 766,000 - Land 180,000 390,000 Buildings and equipment (net) 496,000 300,000 Total assets $ 2,375,000 $ 1,510,000 Liabilities $ (480,000) $ (400,000) Common stock (610,000) (320,000) Additional paid-in capital - (90,000) Retained earnings, 12/31/18 (1,285,000) (700,000) Total liabilities and equities $ (2,375,000) $ (1,510,000) Prepare a worksheet to consolidate the separate 2018 financial statements for Gibson and Keller. How would the consolidation entries in requirement (a) have differed if Gibson had sold a building with a $60,000 book value (cost of $140,000) to Keller for $100,000 instead of land, as the problem reports? Assume that the building had a 10-year remaining life at the date of transfer.

The individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2018, follow. Gibson acquired a 60 percent interest in Keller on January 1, 2017, in exchange for various considerations totaling $570,000. At the acquisition date, the fair value of the noncontrolling interest was $380,000 and Keller’s book value was $850,000. Keller had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $100,000. This intangible asset is being amortized over 20 years. Gibson sold Keller land with a book value of $60,000 on January 2, 2017, for $100,000. Keller still holds this land at the end of the current year. Keller regularly transfers inventory to Gibson. In 2017, it shipped inventory costing $100,000 to Gibson at a price of $150,000. During 2018, intra-entity shipments totaled $200,000, although the original cost to Keller was only $140,000. In each of these years, 20 percent of the merchandise was not resold to outside parties until the period following the transfer. Gibson owes Keller $40,000 at the end of 2018. Gibson Keller Company Company Sales $ (800,000) $ (500,000) Cost of goods sold 500,000 300,000 Operating expenses 100,000 60,000 Income of Keller Company (84,000) - Net income $ (284,000) $ (140,000) Retained earnings, 1/1/18 $ (1,116,000) $ (620,000) Net income (284,000) (140,000) Dividends paid 115,000 60,000 Retained earnings, 12/31/18 $ (1,285,000) $ (700,000) Cash $ 177,000 $ 90,000 Accounts receivable 316,000 410,000 Inventory 440,000 320,000 Investment in Keller Company 766,000 - Land 180,000 390,000 Buildings and equipment (net) 496,000 300,000 Total assets $ 2,375,000 $ 1,510,000 Liabilities $ (480,000) $ (400,000) Common stock (610,000) (320,000) Additional paid-in capital - (90,000) Retained earnings, 12/31/18 (1,285,000) (700,000) Total liabilities and equities $ (2,375,000) $ (1,510,000) Prepare a worksheet to consolidate the separate 2018 financial statements for Gibson and Keller. How would the consolidation entries in requirement (a) have differed if Gibson had sold a building with a $60,000 book value (cost of $140,000) to Keller for $100,000 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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Question

Gibson sold Keller land with a book value of $60,000 on January 2, 2017, for $100,000. Keller still holds this land at the end of the current year.

Keller regularly transfers inventory to Gibson. In 2017, it shipped inventory costing $100,000 to Gibson at a price of $150,000. During 2018, intra-entity shipments totaled $200,000, although the original cost to Keller was only $140,000. In each of these years, 20 percent of the merchandise was not resold to outside parties until the period following the transfer. Gibson owes Keller $40,000 at the end of 2018.

			Gibson	Keller
			Company	Company
Sales	$ (800,000)	$ (500,000)
Cost of goods sold	500,000	300,000
Operating expenses	100,000	60,000
Income of Keller Company	(84,000)	-
Net income	$ (284,000)	$ (140,000)

Retained earnings, 1/1/18	$ (1,116,000)	$ (620,000)
Net income	(284,000)	(140,000)
Dividends paid	115,000	60,000
Retained earnings, 12/31/18	$ (1,285,000)	$ (700,000)

Cash	$ 177,000	$ 90,000
Accounts receivable	316,000	410,000
Inventory	440,000	320,000
Investment in Keller Company	766,000	-
Land	180,000	390,000
Buildings and equipment (net)	496,000	300,000
Total assets	$ 2,375,000	$ 1,510,000

Liabilities	$ (480,000)	$ (400,000)
Common stock	(610,000)	(320,000)
Additional paid-in capital	-	(90,000)
Retained earnings, 12/31/18	(1,285,000)	(700,000)
Total liabilities and equities	$ (2,375,000)	$ (1,510,000)

Prepare a worksheet to consolidate the separate 2018 financial statements for Gibson and Keller.
How would the consolidation entries in requirement (a) have differed if Gibson had sold a building with a $60,000 book value (cost of $140,000) to Keller for $100,000 instead of land, as the problem reports? Assume that the building had a 10-year remaining life at the date of transfer.

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