Problem - On December 31, 2002, Podil Corp. purchased 75% of the common stock of Sumy Co. for $2,317,500. On that date, the fair value of the noncontrolling interest was $772,500, and Sumy had common stock with a par value of $800,000, APIC of $1,550,000, and retained earnings of $620,000. Podil has used the fully adjusted equity method in accounting for its investment in Sumy.
1. On the date of acquisition, Sumy's land had a fair value that was $56,000 more than the book value and the rest of the differential was attributable to goodwill.
2. In June and July 2009 Podil sold inventory to Sumy for $50,000, all of which was sold to a third party by Sumy in September and October 2009. The inventory had cost Podil $30,000 to produce.
3. Podil provided consulting services to Sumy. In 2009 Podil booked $80,000 of these services to Sumy. As of December 31, 2009 Sumy had paid $60,000 for these services.
4. On December 31, 2003 Podil sold a parcel of land to Sumy for $100,000. Podil had purchased this property two years earlier for $77,000. Sumy still holds the deed to the land.
5. On January 1, 2009 Podil paid $250,000 to Sumy for equipment that Sumy had purchased on December 31, 2003 for $435,000. The equipment has no salvage value and was expected to have a useful life of 15 years from the time of purchase on December 31, 2003.
Trial balances for the two companies on December 31, 2009, are as follows:
|
Podil Corporation
|
Sumy Company
|
|
Debits
|
Credits
|
Debits
|
Credits
|
|
|
|
|
|
|
Cash
|
40,700
|
|
40,000
|
|
|
Receivables
|
91,800
|
|
87,400
|
|
|
Note recevable
|
26,000
|
|
|
|
|
Inventory
|
280,000
|
|
218,900
|
|
|
Land
|
500,000
|
|
1,200,000
|
|
|
Bldg & Equip.
|
2,300,000
|
|
2,990,000
|
|
|
Investment in Sumy
|
2,974,000
|
|
|
|
|
Cost of Goods Sold
|
2,193,000
|
|
530,000
|
|
|
Other Operating Expenses
|
1,300,000
|
|
212,000
|
|
|
Deprec.& Amort. Expense
|
202,000
|
|
88,000
|
|
|
Interest Expense
|
70,000
|
|
15,000
|
|
|
Miscellaneous Expenses
|
11,000
|
|
35,000
|
|
|
Dividends Declared
|
50,000
|
|
20,000
|
|
|
Acc. Deprec.
|
|
1,105,000
|
|
420,000
|
|
Accounts Payable
|
|
66,200
|
|
76,300
|
|
Note Payable
|
|
1,020,000
|
|
200,000
|
|
Common Stock
|
|
300,000
|
|
800,000
|
|
APIC
|
|
1,072,000
|
|
1,550,000
|
|
RE
|
|
1,474,800
|
|
1,400,000
|
|
Sales
|
|
4,891,000
|
|
990,000
|
|
Income from Sub
|
|
109,500
|
|
|
|
$10,038,500
|
$10,038,500
|
$5,436,300
|
$5,436,300
|
Required:
a. Give the journal entries that Podil recorded during 2009 related to its investment in Sumy.
b. Give all eliminating entries needed to prepare consolidated statements for 2009.
c. Prepare a three-part worksheet as of December 31, 2009.
d. Prepare a consolidated balance sheet, income statement, and retained earnings statement for 2009.