Question

Pie Corporation acquired 75 percent of Slice Company’s ownership on January 1, 20X8, for $96,000. At that date, the fair value of the noncontrolling interest was $32,000. The book value of Slice’s net assets at acquisition was $100,000. The book values and fair values of Slice’s assets and liabilities were equal, except for Slice’s buildings and equipment, which were worth $20,000 more than book value. Accumulated depreciation on the buildings and equipment was $30,000 on the acquisition date. Buildings and equipment are depreciated on a 10-year basis.

Although goodwill is not amortized, the management of Pie concluded at December 31, 20X8, that goodwill from its purchase of Slice shares had been impaired and the correct carrying amount was $2,500. Goodwill and goodwill impairment were assigned proportionately to the controlling and noncontrolling shareholders. Investment in Slice Co. Stock $96,375. No additional impairment occurred in 20X9.

Trial balance data for Pie and Slice on December 31, 20X9, are as follows:

	Pie Corporation									Slice Company
Item	Debit				Credit					Debit				Credit
Cash		$	68,500								$	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 Slice Company			106,875
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							126,875									48,000
Sales							290,000									200,000
Income from Slice Company							25,500
		$	1,027,375			$	1,027,375				$	429,000			$	429,000
a. Record all consolidation entries needed to prepare a three-part consolidation worksheet as of December 31, 20X9. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) a1.Record the basic consolidation entry. a2.Record the amortized excess value reclassification entry. a3.Record the excess value (differential) reclassification entry. a4.Record the optional accumulated depreciation consolidation entry. b. Prepare a three-part consolidation worksheet for 20X9. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)    c. Prepare a consolidated balance sheet, income statement, and retained earnings statement for 20X9. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Pie Corporation acquired 75 percent of Slice Company’s ownership on January 1, 20X8, for $96,000