uisition-date fair value of $350,000. This intangible asset is being amortized over 20 years. Gibson uses the partial equity method to account for its investment in Keller. Gibson sold Keller land with a book value of $
The individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2021, follow. Gibson acquired a 60 percent interest in Keller on January 1, 2020, in exchange for various considerations totaling $1,050,000. At the acquisition date, the fair value of the noncontrolling interest was $700,000 and Keller’s book value was $1,400,000. Keller had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $350,000. This intangible asset is being amortized over 20 years. Gibson uses the partial equity method to account for its investment in Keller.
Gibson sold Keller land with a book value of $80,000 on January 2, 2020, for $180,000. Keller still holds this land at the end of the current year.
Keller regularly transfers inventory to Gibson. In 2020, it shipped inventory costing $280,000 to Gibson at a price of $400,000. During 2021, intra-entity shipments totaled $450,000, although the original cost to Keller was only $292,500. In each of these years, 20 percent of the merchandise was not resold to outside parties until the period following the transfer. Gibson owes Keller $40,000 at the end of 2021.
See individual statements attached.
Instructions
How would the consolidation entires in requirement a) have been differed if Gibson had sold a building on January 2, 2020 with a $185,000 book value (cost $390,000) to Keller for $350,000 instead of land as the problem reports. Assuming that the building had a 10-year remaining life at the date of transfer.
*I had previously asked requirement A, so it has been completed in a different question I asked*
Prepare entry *TA to defer the intra-entity gain as of the beginning of the year.
Prepare entry ED to remove the excess
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