SCH 05

Student Name: Instructor
Class: McGraw-Hill/Irwin
Problem 05-32
a. How was the balance in the Equity Earnings of Sander account determined?
2011 income reported by Sander
Excess patent fair value amortization
Deferred gross profit for 12/31/11 intra-entity inventory
Recognized gross profit for 1/11/11 intra-entity inventory
Sander's income adjusted
To controlling interest
To noncontrolling interest
$
$
$
230,000
(70,000)
(40,000)
35,000
155,000
124,000
31,000
Correct!
PLYMOUTH COMPANY AND SUBSIDIARY

Consolidation Worksheet
December 31, 2011
Accounts
Revenues
Cost of goods sold
Depreciation expense
Amortization expense
Interest expense
Equity earnings - Sander
Separate company income
Plymouth
(1,740,000)
820,000
Sander
(950,000)
500,000
104,000
220,000
20,000
(124,000)
(700,000)
85,000
120,000
15,000
(230,000)
Adjustments and
Eliminations
Debit
Credit
300,000
40,000
300,000
35,000
70,000
124,000
Consolidated income to noncontrolling

interest
Consolidated income to controlling
interest
(31,000)
Retained earnings, 1/1
(2,800,000)
(345,000)
Net Income
Dividends paid
Retained earnings, 12/31
(700,000)
200,000
(3,300,000)
(230,000)
25,000
(550,000)
Cash
Accounts receivable
Inventory
Investment in Sander
535,000
575,000
990,000
1,420,000
115,000
215,000
800,000
Buildings and equipment

Patents
Goodwill
Total assets
1,025,000
950,000
863,000
107,000
5,495,000
2,100,000
Accounts payable
Notes payable
Noncontrolling interest in Sander 1/1
(450,000)
(545,000)
310,000
35,000
20,000
20,000
210,000
225,000
70,000
(200,000)
(450,000)
242,000
87,000
Parentheses indicate a credit balance.
(900,000)
(300,000)
(3,300,000)
(5,495,000)
5,000
40,000
968,000
348,000
124,000
Noncontrolling interest in Sander 12/31

Common stock
Additional paid-in capital
Retained earnings 12/31
Total liabilities and equity
Noncontrolling
Interest
(800,000)
(100,000)
(550,000)
(2,100,000)
800,000
100,000
2,234,000
2,234,000
(329,000)
(355,000)
Consolidated
Totals
(2,390,000)
1,025,000
Correct!
Correct!
189,000
410,000
35,000
-
Correct!
Correct!
Correct!
Correct!
(731,000)
Correct!
31,000
Correct!
(700,000)
Correct!
(2,800,000)
Correct!
(700,000)
200,000
(3,300,000)
Correct!
Correct!
Correct!
650,000
790,000
1,750,000
-
Correct!
Correct!
Correct!
Correct!
1,888,000
1,197,000
225,000
6,500,000
Correct!
Correct!
Correct!
Correct!
(650,000)
(995,000)
Correct!
Correct!
(355,000)
Correct!
(900,000)
(300,000)
(3,300,000)
6,500,000
Correct!
Correct!
Correct!
Correct!
Given Data P05-32:

Sander Company outstanding stock purchased
by Plymouth Corp on 1/1/09
Cash paid for Sander stock
Sander's book value at time of purchase
Sander's business fair value at time of purchase
Undervaluation of Sander's patent account at time of purchase
Remaining life of patents (years)
80%
$ 1,200,000
$
925,000
$ 1,500,000
$
350,000
5
Intercompany inventory sales for past three years:
Year
2009
2010
2011
Intra-Entity
Sales
$
125,000
220,000
300,000
Intra-Entity
Ending Inv.
Transfer
Price
$
80,000
125,000
160,000
Gross Profit
Rate on
Intra-Entity
Inventory
Transfers
25%
28%
25%
Separate financial statements as of December 31, 2011
Revenues
Cost of goods sold
Operating expenses
Amortization expense
Interest expense
Equity in earnings of Sander
Net income
Plymouth
Sander
12/31/2011
12/31/2011
$ (1,740,000) $ (950,000)
820,000
500,000
104,000
85,000
220,000
120,000
20,000
15,000
(124,000)
$ (700,000) $ (230,000)
Retained earnings, 1/1/11

Net income
Dividends paid
$ (2,800,000) $
(700,000)
200,000
$ (3,300,000) $
Cash
Accounts receivable
Inventories
Investment in Sander
Buildings and equipment
Patents
Total assets
Accounts payable
Notes payable
Common stock
Retained earnings 12/31/11
(450,000) $
(545,000)
(900,000)
(300,000)
(3,300,000)
535,000
575,000
990,000
1,420,000
1,025,000
950,000
$ 5,495,000
(345,000)
(230,000)
25,000
(550,000)
115,000
215,000
800,000
863,000
107,000
$ 2,100,000
(200,000)
(450,000)
(800,000)
(100,000)
(550,000)
Total liabilities and stockholders' equity
$ (5,495,000) $ (2,100,000)
Student Name: Instructor

Class: McGraw-Hill/Irwin
Problem 05-35
Part A.
Life in
years
Consideration transferred
Noncontrolling interest fair value
Subsidiary fair value at acquisition-date
Book value
Fair value in excess of book value
Excess fair value assignment to customer list
$
$
$
570,000
380,000
950,000
(850,000)
100,000
100,000
-
Annual
Excess
Amort.
Correct!
Correct!
20
$ 5,000
Correct!
Consolidation entries:
Entry *TL
Retained Earnings, 1/1/11 (Gibson)
Land
40,000
Correct!
40,000
Correct!
To remove unrealized gain on intra-entity downstream transfer of land made

in 2010.
Entry *G
Retained Earnings, 1/1/11 (Keller)

Cost of Goods Sold
10,000
Correct!
10,000
Correct!
To defer unrealized upstream Inventory gross profit from 2010 until 2011.
Entry *C
Investment in Keller
9,000
Correct!
9,000
Correct!
To record parent's share of amortization
Entry S
Common Stock (Keller

Additional Paid-in Capital
Retained Earnings, 1/1/11 (Keller)
Noncontrolling interest in Keller
320,000
90,000
610,000
Correct!
Correct!
Correct!
612,000
408,000
Correct!
Correct!
To remove stockholders' equity accounts of Keller and recognize beginning

noncontrolling interest.
Entry A
Customer list
Noncontrolling lnterest in Keller, 1/1/11
95,000
To recognize amount paid within acquisition price for the customer list.
Correct!
57,000
38,000
Correct!
Correct!
Entry I
Income of Keller
84,000
Correct!
84,000
Correct!
To eliminate intra-entity income accrual
Entry D
Dividends Paid
36,000
Correct!
36,000
Correct!
To eliminate intra-entity dividend transfers
Entry E
Amortization Expense
Customer list
5,000
Correct!
5,000
Correct!
To recognize current period excess amortization expense
Entry P
Liabilities
Accounts Receivable
40,000
Correct!
40,000
Correct!
To eliminate intra-entity debt
Entry TI
Sales
Cost of Goods Sold
200,000
Correct!
200,000
Correct!
To eliminate current year intra-entity inventory transfer
Entry G
Cost of Goods Sold
Inventory
12,000
To defer 2011 unrealized inventory gross profit
Noncontrolling interest in Keller's net income

Keller reported net income
Excess fair value amortization
2010 intra-entity gross profit realized in 2011
2011 intra-entity gross profit deferred
Keller realized income 2011
Outside ownership percentage
Noncontrolling interest in Keller's net income
Correct!
12,000
$
$
140,000
(5,000)
10,000
(12,000)
133,000
40%
53,200
Correct!
Correct!
GIBSON AND KELLER

Consolidation Worksheet
Year Ending December 31, 2011
NonConsolidation Entries
Accounts
Gibson
Sales
Keller
(800,000)
Cost of goods sold
500,000
Operating expenses
100,000
Income of Keller
(84,000)
Separate company net income
(284,000)
Debit
(500,000) [TI]
300,000
[G]
controlling
Credit
Interest
200,000
12,000
Totals
(1,100,000)
[*G]
10,000
[TI]
200,000
Correct!
602,000
Correct!
60,000
[E]
5,000
165,000
Correct!
[I]
84,000
Correct!
(140,000)
Consolidated net income

To noncontrolling interest
Consolidated
(53,200)
To parent
(333,000)
Correct!
53,200
Correct!
(279,800)
Correct!
(1,067,000)
Correct!

- Gibson
(1,116,000)
- Keller
[*TL]
40,000
[*C]
9,000
(620,000) [*G]
[S]
Net Income
Dividends
(284,000)
(140,000)
115,000
60,000
(1,285,000)
10,000
610,000
[D]
36,000
24,000
(700,000)
Correct!
(279,800)
Correct!
115,000
Correct!
(1,231,800)
Correct!
Cash
177,000
90,000
267,000
Correct!
Accounts receivable
356,000
410,000
[P]
40,000
726,000
Correct!
Inventory
440,000
320,000
[G]
12,000
748,000
Correct!
726,000
[*C]
9,000
Correct!
[S]
612,000
[I]
84,000
[A]
57,000
[*TL]
40,000
530,000
Correct!
796,000
Correct!
90,000
Correct!
3,157,000
Correct!
[D]
Land
180,000
390,000
Buildings and equipment (net)
496,000
300,000
Customer list
[A]
Total assets
2,375,000
36,000
95,000
[E]
5,000
1,510,000
Liabilities
(480,000)
(400,000) [P]
40,000
(840,000)
Correct!
Common stock
(610,000)
(320,000) [S]
320,000
(610,000)
Correct!
(90,000) [S]
90,000

(1,285,000)
(700,000)
Noncontrolling interest in
Keller, 1/1/11
(1,231,800)
Correct!
Correct!
[S]
408,000
(408,000)
Correct!
[A]
38,000
(38,000)
Correct!
Noncontrolling interest in
(475,200)
(475,200)
Correct!
(3,157,000)
Correct!
Keller, 12/31/11
Total liabilities and equity
(2,375,000)
(1,510,000)
Part b. How would the consolidation entries in requirement (a) have differed if Gibson
had sold a building with a $600,000 book value (cost of $140,000) to Keller for $100,000 instead of
land, as the problem reports?
If the intra-entity transfer had been a building rather than land, two adjustments to the consolidation
entries would be needed. Entry *TL would be changed and relabeled as Entry *TA and an Entry ED
would be added to eliminate the overstatement of depreciation expense for 2011. All other consolidation
entries would be the same as shown in Part a. As a downstream transfer, entries *C and S are not affected.
Entry *TA
Buildings
Accumulated Depreciation
36,000
40,000
Correct!
Correct!
76,000
Correct!
Entry ED
Accumulated Depreciation
Operating (or Depreciation) Expense
4,000
Correct!
4,000
Correct!
Given Data P05-35

Part a. facts:
Gibson acquired interest in Keller 1/1/2010
Various considerations given for acquisition
Fair value of noncontrolling interest at acquisition
Keller's book value
Value assigned to Keller customer list
Keller customer list - life for purposes of amortization
Book value of land Gibson sold to Keller on 1/2/2010
Price paid by Keller for Gibson's land
Cost of inventory shipped by Keller to Gibson in 2010
Price paid by Gibson for 2010 inventory
Cost of intra-entity shipments by Keller to Gibson in 2011
Price paid by Gibson for 2011 intra-entity shipments
Percentage of inventory resold in period following transfer
Amount Gibson owes Keller at end of 2011
Part b. facts:
Building sold to Keller instead of land
Book value of building Gibson sold to Keller
Price paid by Keller for Gibson building
Cost of building
Remaining life at date of transfer
$
$
$
$
$
$
$
$
$
$
$
$
$
$
60%
570,000
380,000
850,000
100,000
20
60,000
100,000
100,000
150,000
140,000
200,000
20%
40,000
60,000
100,000
140,000
10
Sales
Cost of goods sold
Operating expenses
Income of Keller Company
Net income
Gibson
Keller
Company
Company
12/31/2011
12/31/2011
$ (800,000) $
(500,000)
500,000
300,000
100,000
60,000
(84,000)
$ (284,000) $
(140,000)

Net income
Dividends paid
$ (1,116,000) $
(284,000)
115,000
$ (1,285,000) $
Cash
Accounts receivable
Inventory
Investment in Keller Company
Land
Buildings and equipment (net)
Total assets
Liabilities
Common stock
177,000
316,000
440,000
766,000
180,000
496,000
$ 2,375,000
(480,000) $
(610,000)
(1,285,000)
(620,000)
(140,000)
60,000
(700,000)
90,000
410,000
320,000
390,000
300,000
1,510,000
(400,000)
(320,000)
(90,000)
(700,000)
Total liabilities and equities
$ (2,375,000) $ (1,510,000)

SCH 05

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SCH 05

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Student Name: Instructor

PLYMOUTH COMPANY AND SUBSIDIARY

Consolidated income to noncontrolling

Retained earnings, 1/1

Buildings and equipment

Parentheses indicate a credit balance.

Noncontrolling interest in Sander 12/31

Given Data P05-32:

Intercompany inventory sales for past three years:

Separate financial statements as of December 31, 2011

Retained earnings, 1/1/11

Total liabilities and stockholders' equity

Student Name: Instructor

To remove unrealized gain on intra-entity downstream transfer of land made

Retained Earnings, 1/1/11 (Keller)

To record parent's share of amortization

Common Stock (Keller

To remove stockholders' equity accounts of Keller and recognize beginning

To eliminate intra-entity income accrual

To eliminate intra-entity dividend transfers

To recognize current period excess amortization expense

To eliminate intra-entity debt

To eliminate current year intra-entity inventory transfer

To defer 2011 unrealized inventory gross profit

Noncontrolling interest in Keller's net income

GIBSON AND KELLER

Cost of goods sold

Separate company net income

Consolidated net income

Retained earnings, 1/1/11

Buildings and equipment (net)

Additional paid-in capital

Given Data P05-35

Retained earnings, 1/1/11

Total liabilities and equities

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