Chapter 7, Problem 25P

To determine

Prepare a consolidation worksheet.

Explanation of Solution

The worksheet to consolidate the companies is as follows:

Company H and Consolidated Subsidiaries
Consolidation Worksheet
as on 12/31/2018
	Company H	Company W	Company C	Consolidation Entries		Non-controlling	Consolidated
Accounts				Debit	Credit	Interest	Balances
Sales and other revenue	($900,000)	($700,000)	($300,000)	(TI) 200,000			($1,700,000)
Cost of goods sold	$551,000	$300,000	$140,000	(G)  18,000	(*G)  12,000		$797,000
					(TI) 200,000
Operating expenses	$219,000	$270,000	$90,000	(E)      2,000			$581,000
Income of Company W	($91,000)			(I2)   91,000			$0
Income of Company C	($28,000)	($28,000)		(I1)   56,000			$0
Net income	($249,000)	($158,000)	($70,000)
Consolidated net income							($322,000)
Net income attributable to
non-controlling interest (Company W)						($45,000)	$45,000
Net income attributable to
non-controlling interest (Company C)						($14,000)	$14,000
Net income attributable to Company H							($263,000)
Balance Sheet
Cash and receivables	$220,000	$334,000	$67,000				$621,000
Inventory	$390,200	$320,000	$103,000		(G) 18000		$795,200
Investment in Company W	$807,800			(D2)   67,200	(*C) 11200		$0
					(S2) 621600
					(S2) 91000
					(A)   151200
Investment in Company C	$128,000	$128,000		(D1)   40,000	(S1) 240000		$0
					(I1) 56000
Buildings	$385,000	$320,000	$144,000	(A)     54,000	(E)    3000		$900,000
Equipment	$310,000	$130,000	$88,000	(E)       5,000	(A)    10000		$523,000
Land	$180,000	$300,000	$16,000				$496,000
Goodwill				(A)  140,000			$140,000
Franchise Contracts				(A)    32,000	(E)    4000		$28,000
Total assets	$2,421,000	$1,532,000	$418,000				$3,503,200
Liabilities	($632,000)	($570,000)	($98,000)				($1,300,000)
Non-controlling interest in Company C					(S1)  60000		($60,000)
Non-controlling interest in Company W					(S2) 266400
Non-controlling interest in					(A)    64,800	($331,200)
subsidiary companies						($411,400)	($411,400)
Common stock	($820,000)	($310,000)	($150,000)	(S1) 150,000			($820,000)
				(S2) 310,000
Retained earnings	($969,000)	($652,000)	($170,000)				($971,800)
Total liabilities and equities	($2,421,000)	($1,532,000)	($418,000)	$1,916,400	$1,916,400		($3,503,200)

Table: (1)

Working note:

Statement of	Company H	Company W	Company C	Consolidation Entries		Non-controlling	Consolidated
Retained Earnings				Debit	Credit	Interest	Balances
Retained earnings, 1/1/18:
Company H	($820,000)			(*C)  11,200			($808,800)
Company W		($590,000)		(*G)  12,000			$0
				(S2)578,000
Company C			($150,000)	(S1)150,000			$0
Net Income	($249,000)	($158,000)	($70,000)				($263,000)
Dividends declared
Company H	$100,000						$100,000
Company W		$96,000			(D2) 67,200	$28,800	$0
Company C			$50,000		(D1) 40,000	$10,000	$0
Retained earnings, 12/31/18	($969,000)	($652,000)	($170,000)				($971,800)

Table: (2)

Computation of Non-controlling interest in Company C net income:

Particulars	Amount
Non-controlling Interest in Net Income of Company C:
Reported net income	$      70,000
Outside ownership	20%
Non-controlling interest in Company C net income	$      14,000

Table: (3)

Computation of Non-controlling interest in net income of Company W:

Particulars	Amount
Non-controlling Interest in Net Income of Company W:
Reported operating income	$    130,000
Equity income of Company C($70,000 × 40%)	$      28,000
Excess amortization	$       (2,000)
Recognition of 2017gross profit (Entry *G)	$      12,000
Deferral of 2018 intra-entity gross profit (Entry G)	$     (18,000)
Accrual-based net income	$    150,000
Outside ownership	30%
Non-controlling interest in net income of Company W	$      45,000

Table: (4)