Question

The individual financial statements for Gibson Company and Keller Company for the year ending December 31,...

The individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2018, follow. Gibson acquired a 60 percent interest in Keller on January 1, 2017, in exchange for various considerations totaling $1,020,000. At the acquisition date, the fair value of the noncontrolling interest was $680,000 and Keller’s book value was $1,360,000. Keller had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $340,000. This intangible asset is being amortized over 20 years. Gibson sold Keller land with a book value of $75,000 on January 2, 2017, for $170,000. Keller still holds this land at the end of the current year. Keller regularly transfers inventory to Gibson. In 2017, it shipped inventory costing $234,000 to Gibson at a price of $390,000. During 2018, intra-entity shipments totaled $440,000, although the original cost to Keller was only $308,000. 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 $35,000 at the end of 2018. Gibson Company Keller Company Sales $ (1,040,000 ) $ (740,000 ) Cost of goods sold 740,000 540,000 Operating expenses 120,000 75,000 Equity in earnings of Keller (75,000 ) 0 Net income $ (255,000 ) $ (125,000 ) Retained earnings, 1/1/18 $ (1,356,000 ) $ (740,000 ) Net income (above) (255,000 ) (125,000 ) Dividends declared 145,000 45,000 Retained earnings, 12/31/18 $ (1,466,000 ) $ (820,000 ) Cash $ 193,000 $ 100,000 Accounts receivable 404,000 650,000 Inventory 630,000 560,000 Investment in Keller 1,116,000 0 Land 210,000 630,000 Buildings and equipment (net) 520,000 540,000 Total assets $ 3,073,000 $ 2,480,000 Liabilities $ (777,000 ) $ (960,000 ) Common stock (830,000 ) (600,000 ) Additional paid-in capital 0 (100,000 ) Retained earnings, 12/31/18 (1,466,000 ) (820,000 ) Total liabilities and equities $ (3,073,000 ) $ (2,480,000 )

Prepare a worksheet to consolidate the separate 2018 financial statements for Gibson and Keller.

How would the consolidation entries in requirement (a) have differed if Gibson had sold a building with a $180,000 book value (cost of $380,000) to Keller for $340,000 instead of land, as the problem reports? Assume that the building had a 10-year remaining life at the date of transfer.

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