Chapter 6, Problem 45P

a.

To determine

Prepare consolidation worksheet adjustments for 2018.

Explanation of Solution

Entry *TL
Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Investment in Company H		7,000
	Land			7,000
	(Being intra-entity gain eliminated))
Entry *G
Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Retained earnings of Company H		8,000
	Cost of goods sold			8,000
	(being opening unrealized gross profit eliminated)
Entry S
Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Common stock		100,000
	Retained earnings on 01/01/2017		292,000
	Investment in Company H			235,200
	Non controlling interest			156,800
	(being controlling and non-controlling interest recorded)
Entry A
Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Patents		75,000
	Customer List		104,000
	Investment in Company H			107,400
	Non controlling interest			71,600
	(being assets transferred to controlling and non-controlling interest)
Entry I
Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Investment income		3,000
	Investment in Company H			3,000
	(being intra-entity equity income eliminated)
Entry D
Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Investment in Company H		2,400
	Dividend expense			2,400
	(being intra-entity dividend expense eliminated)
Entry E
Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Amortization expense		20,500
	Patents			7,500
	Customer List			13,000
	(being amortization expense of current year recorded)
Entry P
Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Accounts Payable		60,000
	Accounts Receivable			60,000
	(being intra-entity receivables and payables eliminated)
Entry B
Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Bond payable		20,000
	Premium on Bond payable		1,069
	Interest Income		1,873
	Investment in Bonds			19,005
	Interest expense			1,283
	Gain on retirement of Bonds			2,654
	(being the intra-entity bonds recognized)
Entry TI
Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Sales		120,000
	Cost of goods sold			120,000
	(being intra-entity sale eliminated)
Entry G
Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Cost of goods sold		7,500
	Inventory			7,500
	(being unrealized gross profit on ending inventory eliminated)

Table: (1)

b.

To determine

Calculate the amount of consolidated net income attributable to the non-controlling interest for 2018. In addition, determine the ending 2018 balance for non-controlling interest in the consolidated balance sheet.

Explanation of Solution

Computation of the amount of consolidated net income attributable to the non-controlling interest for 2018:

Particulars	Amount
Net income reported by company H in 2018	$   25,000
Excess fair value amortizations	$ (20,500)
Deferred gross profit recognized	$     8,000
Unrecognized gross profit deferred	$   (7,500)
Net income realized in 2018	$     5,000
Ownership of non-controlling interest	40%
Net income attributable to non-controlling interest	$     2,000

Table: (2)

Computation of the ending 2018 balance for non-controlling interest in the consolidated balance sheet:

Particulars	Amount
Non-controlling interest as on 01/01/2018	$ 228,400
Net income attributable to non-controlling interest	$     2,000
Share of non-controlling interest in dividend	$   (1,600)
Non-controlling interest as on 12/31/2018	$ 228,800

Table: (3)

c.

To determine

Determine the consolidation worksheet adjustments needed in 2019 in connection with the intra-entity bonds.

Explanation of Solution

The consolidation worksheet adjustments needed in 2019 in connection with the intra-entity bonds:

Entry *B
Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
12/31/2019	Bond payable		20,000
	Premium on Bond payable		733
	Interest Income		1,901
	Investment in Bonds			2,064
	Interest expense			19,306
	Gain on retirement of Bonds			1,264
	(being the intra-entity bonds eliminated)

Table: (4)