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Presentation/PPT
27/08/2022
“On January 1, 2009, Conway Company purchased 80% of Smith MFG for $990,000. A that time Smith had capital stock outstanding of $350,000 and retained earnings of $375,000. The fair value of the non-controlling interest on January 1, 2009 was $150,000. The fair value of Smith Mfg’s assets and liabilities is equal to their book value except for the following: Inventory FV=$210,000, BV=$160,000; Equipment FV=$350,000, BV=$200,000 (useful life 10 years). One half of the inventory was sold in 2009, the remainder was sold in 2010.At the end of 2009, Conway Company had in its ending inventory $60,000 of merchandise it had purchased from Smith MFG during the year. Smith MFG sold the merchandise at 25% above cost. During 2010, Conway sold merchandise to Smith for $310,000 at a markup of 20% of the selling price. At December 31, 2010, Smith still had merchandise that it purchased from Conway for $82,000 in its inventory.On January 1, 2010 Smith sold land to Conway for $60,000 which had been reported on Smith books at $40,000. On July 1, 2009 Conway sold a building to Smith for $100,000. It originally cost $150,000 but on July 1, 2009 had a book value of $75,000. It had a 10 year remaining life at the point of transfer. Smith still owes Conway $50,000 on the building at the end of 2010 and paid $5,000 interest on this loan in 2010.On 1/1/2010 Smith acquired all the outstanding Conway bonds for $95,199 (an amount that yielded 12% to maturity). Conway book value at 1/1/2010 was $105,156 as the bonds were issued to yield 8% and had a 10% coupon. The bonds matured 1/1/2013.REQUIRED:Prepare the consolidating journal entries and complete the following worksheet. Consolidated Worksheet For the year Ended 12/31/2010 Conway Smith Consolidation Entries NCI ConsolidatedAccount Ent. MFG. DR CR BalanceRevenue $1,395,000 $780,000 Dividend Income $20,000 Gain on sale of land 20,000 Interest income $5,000 11,124 Total revenue $1,420,000 $811,124 Cost of goods sold: Beginning inventory $230,000 $145,000 Purchases $900,000 $380,000 Cost of goods avail $1,130,000 $525,000 Less Ending Inventory $450,000 $200,000 Cost of goods sold $680,000 $325,000 Interest expense 8,413 $5,000 Other expenses $250,000 $190,000 Net Income $481,587 $291,124 R/E, 1/1/10 $1,500,000 $540,000 Net Income $481,587 $291,124 Dividends ($50,000) ($25,000) R/E, 12/31/10 $1,931,587 $806,124 Cash $190,156 $45,000 Accounts receivable $302,000 $90,000 Inventory $450,000 $200,000 Invest in Smith $990,000 Investment in Bonds 96,223 Land $100,000 $60,000 Building (net) $450,000 $325,000 Equipment (net) $300,000 $200,000 Goodwill Other assets $390,000 $230,000 Total Assets $3,172,156 $1,246,223 Accounts payable $75,000 $30,099 Bonds Payable 100,000 Premium of Bonds Pay 3,569 Other liabilities $102,000 $60,000 Common Stock $960,000 $350,000 Add Paid-in Capital R/E, 12/31/10 $1,931,587 $806,124 NCI Total L& OE $3,172,156 $1,271,223
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