ADVANCED ACCOUNTING
ADVANCED ACCOUNTING
12th Edition
ISBN: 9780357671221
Author: FISCHER
Publisher: CENGAGE L
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Chapter 5, Problem 5.3P
To determine

Concept Introduction:

Intercompany adjustments in consolidation- Inter-company receivables and payables are eliminated, and subsidiary’s capital is also eliminated.

To prepare The necessary worksheet for consolidation of given accounts

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Answer to Problem 5.3P

       Eliminations & AdjustmentsNCIControlled Retained EarningsConsolidated Balance Sheet
     GADr. Cr   
    Cash 404,486 72,625      477,111
    Accounts Receivable(net) 752,500 105,000      857,500
    Interest Receivable 9,625   (9,625)    -
    Inventory 1,950,000 900,000      2,850,000
    Investment in Appliance outlets 1,700,000    (1,700,000)   -
    Investment in 11% bonds 254,000    (254,000)   -
    Investment in Mortgage 175,000    (175,000)   -
    Property,plant and Equipment 9,000,000 2,950,000 167,500 (195,000)   11,922,500
    Accumulated Depreciation (1,695,000) (940,000)     (2,635,000)
    Accounts Payable (670,000) (80,000)     (750,000)
    Interest Payable (18,333) (9,625)  9,625    (18,333)
    Bonds Payable(11%) (2,000,000) (500,000) 250,000     (2,250,000)
    Discount on bonds payable 10,470 12,000   (6,000)   16,470
    Mortgage Payable  (175,000) 175,000     -
    Common stock($5 par) (3,200,000)      (3,200,000)
    Common stock($10 par)  (800,000) 800,000     -
    Other paid-In capital in excess of par (4,550,000) (625,000) 625,000     (4,550,000)
    Retained Earnings, January 1,2016 (1,011,123) (770,000) 770,000 (256,000)   (1,267,123)
    Sales (9,800,000) (3,000,000)     (12,800,000)
    Gain on sale of Building (27,500)  27,500     -
    Interest income (36,125)  27,500     (8,625)
    Dividend Income (48,000)  48,000     -
    Cost of goods sold 4,940,000 1,700,000      6,640,000
    Depreciation expense 717,000 95,950      812,950
    Interest expense 223,000 67,544   (27,500)   263,044
    Other expenses 2,600,000 936,506      3,536,506
    Dividends declared 320,000 60,000   (60,000)   320,000
    Loss on settlement of bonds   10,000     10,000
    Goodwill   200,000     200,000
    NCI    (427,000)   (427,000)
    Totals - 03,090,875-3,090,875000
        0   

Explanation of Solution

    Computation of Goodwill 
     $
    Common stock($10 par) 800,000
    Other paid in capital in excess of par 625,000
    Retained earnings 450,000
    Total value of Appliance Outlets 1,875,000
    General Appliance's stake @80% 1,500,000
    Consideration paid 1,700,000
    Goodwill (Consideration Paid-Value of stake acquired) 200,000
    Computation of Goodwill 
     Schedule of bonds discount amortization 
    DateParticulars$
    31.12.12Discount on bond issued24000
    31.12.13Less. Discount amortization-3000
    31.12.13Closing balance21000
    31.12.14Less. Discount amortization-3000
    31.12.14Closing balance18000
    31.12.15Less. Discount amortization-3000
    31.12.15Closing balance15000
    31.12.16Less. Discount amortization-3000
    31.12.16Closing balance12000
    Investment in 11% bonds254000
    Less. Nominal value of 50% bonds-250,000
    Add. Discount on bonds (50%)-6000
    Loss on retirement of bond10,000
    Minority Interest 
    Common stock($10 par) 800,000
    Other paid-In capital in excess of par 625,000
    Retained Earnings,January 1,2016 770,000
    20% Minority Interest 439,000
    Less: Dividend-12000
    Minority Interest 427,000

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