Mill Corporation acquired 100 percent ownership of Roller Company on January 1, 2018. At that date, the net assets of Roller Company had a book value of $80,000. Also, on the date of acquisition, the fair value of Roller's buildings and equipment was $20,000 more than the book value. Buildings and equipment are depreciated on a 10-year basis. In 2018, Roller reported net income of $50,000 and declared dividends and paid dividends of $22,000. Roller did not issue any new stock since the acquisition. Although goodwill is not amortized, Mill's management concluded at December 31, 2019, before the preparation of the consolidated financial statements, that goodwill involved in its acquisition of Roller shares had been impaired and the correct carrying value was $2,500. Mill uses the equity method to account for the investment in Roller. During 2019, Roller had $12,000 outstanding accounts payable owed to Mill. The unadjusted trial balance data for Mill and Roller on December 31, 2019, are as follows: Item Mill Roller Cash $45,500 $32,000 Accounts Receivable 85,000 14,000 Inventory 97,000 24,000 Land 50,000 25,000 Buildings & Equipment 350,000 150,000 Investment in Roller Co. Stock 152,000 NA Cost of Goods Sold 145,000 114,000 Wage Expense 35,000 20,000 Depreciation Expense 25,000 10,000 Interest Expense 12,000 4,000 Other Expenses 23,000 16,000 Dividends Declared 30,000 20,000 Accumulated Depreciation $170,000 $50,000 Accounts Payable 51,000 15,000 Wages Payable 14,000 6,000 Notes Payable 150,000 50,000 Common Stock 200,000 60,000 Retained Earnings 140,500 ?? Sales 290,000 200,000 Income from Subsidiary ?? NA Required: 1. Prepare the necessary journal entry to record the acquisition transaction on January 1, 2018. 2. Prepare the consolidation worksheet (in proper format) for the year ended December 31, 2019. Show all details including consolidated totals.
Mill Corporation acquired 100 percent ownership of Roller Company on January 1, 2018. At that date, the net assets of Roller Company had a book value of $80,000. Also, on the date of acquisition, the fair value of Roller's buildings and equipment was $20,000 more than the book value. Buildings and equipment are depreciated on a 10-year basis. In 2018, Roller reported net income of $50,000 and declared dividends and paid dividends of $22,000. Roller did not issue any new stock since the acquisition. Although goodwill is not amortized, Mill's management concluded at December 31, 2019, before the preparation of the consolidated financial statements, that goodwill involved in its acquisition of Roller shares had been impaired and the correct carrying value was $2,500. Mill uses the equity method to account for the investment in Roller. During 2019, Roller had $12,000 outstanding accounts payable owed to Mill. The unadjusted trial balance data for Mill and Roller on December 31, 2019, are as follows: Item Mill Roller Cash $45,500 $32,000 Accounts Receivable 85,000 14,000 Inventory 97,000 24,000 Land 50,000 25,000 Buildings & Equipment 350,000 150,000 Investment in Roller Co. Stock 152,000 NA Cost of Goods Sold 145,000 114,000 Wage Expense 35,000 20,000 Depreciation Expense 25,000 10,000 Interest Expense 12,000 4,000 Other Expenses 23,000 16,000 Dividends Declared 30,000 20,000 Accumulated Depreciation $170,000 $50,000 Accounts Payable 51,000 15,000 Wages Payable 14,000 6,000 Notes Payable 150,000 50,000 Common Stock 200,000 60,000 Retained Earnings 140,500 ?? Sales 290,000 200,000 Income from Subsidiary ?? NA Required: 1. Prepare the necessary journal entry to record the acquisition transaction on January 1, 2018. 2. Prepare the consolidation worksheet (in proper format) for the year ended December 31, 2019. Show all details including consolidated totals.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 30E
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