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

Answer to Problem 5.3P

			Eliminations & Adjustments		NCI	Controlled Retained Earnings	Consolidated Balance Sheet
	G	A	Dr.	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	-	0	3,090,875	-3,090,875	0	0	0
				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
Date	Particulars	$
31.12.12	Discount on bond issued	24000
31.12.13	Less. Discount amortization	-3000
31.12.13	Closing balance	21000
31.12.14	Less. Discount amortization	-3000
31.12.14	Closing balance	18000
31.12.15	Less. Discount amortization	-3000
31.12.15	Closing balance	15000
31.12.16	Less. Discount amortization	-3000
31.12.16	Closing balance	12000

Investment in 11% bonds	254000
Less. Nominal value of 50% bonds	-250,000
Add. Discount on bonds (50%)	-6000
Loss on retirement of bond	10,000

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