Giant acquired all of Small’s common stock on January 1, 2017, in exchange for cash of $770,000. On that day, Small reported common stock of $170,000 and retained earnings of $400,000. At the acquisition date, $37,500 of the fair-value price was attributed to undervalued land while $98,000 was assigned to undervalued equipment having a 10-year remaining life. The $64,500 unallocated portion of the acquisition-date excess fair value over book value was viewed as goodwill. Over the next few years, Giant applied the equity method to the recording of this investment. The following are individual financial statements for the year ending December 31, 2021. On that date, Small owes Giant $12,800. Small declared and paid dividends in the same period. Credits are indicated by parentheses. Giant Small Revenues $ (1,298,800 ) $ (460,000 ) Cost of goods sold 610,000 115,000 Depreciation expense 190,000 203,000 Equity in income of Small (132,200 ) 0 Net income $ (631,000 ) $ (142,000 ) Retained earnings, 1/1/21 $ (1,200,000 ) $ (688,000 ) Net income (above) (631,000 ) (142,000 ) Dividends declared 290,000 120,000 Retained earnings, 12/31/21 $ (1,541,000 ) $ (710,000 ) Current assets $ 181,000 $ 216,000 Investment in Small 1,031,000 0 Land 490,000 231,000 Buildings (net) 396,000 435,000 Equipment (net) 580,000 384,000 Goodwill 0 0 Total assets $ 2,678,000 $ 1,266,000 Liabilities $ (887,000 ) $ (386,000 ) Common stock (250,000 ) (170,000 ) Retained earnings(above) (1,541,000 ) (710,000 ) Total liabilities and equities $ (2,678,000 ) $ (1,266,000 ) Prepare a consolidation worksheet for Giant and Small for the year ending December 31, 2021.

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter3: The Basics Of Record Keeping And Financial Statement Preparation: Income Statement

Section: Chapter Questions

Problem 7E

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Question

Giant acquired all of Small’s common stock on January 1, 2017, in exchange for cash of $770,000. On that day, Small reported common stock of $170,000 and retained earnings of $400,000. At the acquisition date, $37,500 of the fair-value price was attributed to undervalued land while $98,000 was assigned to undervalued equipment having a 10-year remaining life. The $64,500 unallocated portion of the acquisition-date excess fair value over book value was viewed as goodwill. Over the next few years, Giant applied the equity method to the recording of this investment.

The following are individual financial statements for the year ending December 31, 2021. On that date, Small owes Giant $12,800. Small declared and paid dividends in the same period. Credits are indicated by parentheses.

	Giant		Small
Revenues	$	(1,298,800	)	$	(460,000	)
Cost of goods sold		610,000			115,000
Depreciation expense		190,000			203,000
Equity in income of Small		(132,200	)		0
Net income	$	(631,000	)	$	(142,000	)
Retained earnings, 1/1/21	$	(1,200,000	)	$	(688,000	)
Net income (above)		(631,000	)		(142,000	)
Dividends declared		290,000			120,000
Retained earnings, 12/31/21	$	(1,541,000	)	$	(710,000	)
Current assets	$	181,000		$	216,000
Investment in Small		1,031,000			0
Land		490,000			231,000
Buildings (net)		396,000			435,000
Equipment (net)		580,000			384,000
Goodwill		0			0
Total assets	$	2,678,000		$	1,266,000
Liabilities	$	(887,000	)	$	(386,000	)
Common stock		(250,000	)		(170,000	)
Retained earnings(above)		(1,541,000	)		(710,000	)
Total liabilities and equities	$	(2,678,000	)	$	(1,266,000	)