Chapter 5, Problem 35P

a.

To determine

Prepare a worksheet to consolidate the separate 2018 financial statements for Company G and Company K.

Explanation of Solution

Worksheet to consolidate the separate 2018 financial statements for Company G and Company K:

Company G and Company K
Consolidation Worksheet
Year ending December 31, 2018
Income statement	Company G	Company K	Debit	Credit	Non-controlling interest	Consolidated Balances
Revenues	$    (800,000)	$       (500,000)	$     200,000			$(1,100,000)
Cost of goods sold	$      500,000	$        300,000	$       12,000	$            10,000		$     602,000
				$          200,000
Operating expense	$      100,000	$          60,000	E 5,000			$     165,000
Equity in income of Company K	$      (84,000)		I 84,000			$                -
Net income	$    (284,000)	$       (140,000)
Consolidated net income						$   (333,000)
Share of non-controlling interest in net income					$     (53,200)	$       53,200
Share of controlling interest in net income						$   (279,800)
Balance Sheet
Cash	$      177,000	$          90,000				$     267,000
Accounts Receivables	$      356,000	$        410,000		$            40,000		$     726,000
Inventory	$      440,000	$        320,000		$            12,000		$     748,000
Investment in Company K	$      726,000	$                    -	D 36,000	$              9,000
				$          612,000
				$            84,000
				$            57,000
Land	$      180,000	$        390,000		$            40,000		$     530,000
Building and equipment	$      496,000	$        300,000				$     796,000
Customer list	$      380,000	$        110,000	A 95,000	E 5,000		$       90,000
Total assets	$   2,755,000	$     1,620,000				$  3,157,000
Liabilities	$    (480,000)	$       (400,000)	$       40,000			$   (920,000)
Common stock	$    (610,000)	$       (320,000)	$     320,000			$   (610,000)
Additional paid-in capital	$                 -	$         (90,000)	$       90,000			$                -
Retained earnings	$ (1,285,000)	$       (700,000)				$(1,231,800)
Non-controlling interest in Company K				$          408,000	$    408,000
				A $38,000	$      38,000
					$    475,200	$     475,200
Total liabilities and equity	$ (2,375,000)	$    (1,510,000)	$  1,551,000	$       1,551,000		$  3,157,000

Table: (1)

Working note:

Statement of retained earnings	Company G	Company K	Debit	Credit	Non-controlling interest	Consolidated Balances
Retained earnings on 01/01	$ (1,116,000)	$       (620,000)	$       40,000			$(1,067,000)
			$         9,000
			$       10,000
			$     610,000
Net Income	$    (284,000)	$       (140,000)				$   (279,800)
Dividends declared	$      115,000	$          60,000		D 36,000	$      24,000	$     115,000
Retained earnings on 31/12	$ (1,285,000)	$       (700,000)				$(1,231,800)

Table: (2)

b.

To determine

Explain how the consolidation entries in requirement (a) would have differed if Company G had sold a building with a $60,000 book value (cost of $140,000) to Company K for $100,000 instead of land.

Explanation of Solution

Entry TA:

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Retained earnings of Company K on 01/01/2013		$ 36,000
	Buildings		$ 40,000
	Accumulated depreciation			$ 76,000
	(being excess depreciation removed)

Table: (3)

Entry ED:

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Accumulated depreciation		$   4,000
	Depreciation expense			$   4,000
	(being excess depreciation on building recorded)

Table: (4)