Problem - Potter Corporation acquired 80% ownership of Saturn Inc. on January 1, 2010 for $173,000 cash. At that date, the fair value of the noncontrolling interest was $43,250. The unadjusted trial balances for the two companies on December 31, 2011 follow:
|
Potter
|
Saturn
|
|
Debit
|
Credit
|
Debit
|
Credit
|
|
Cash
|
$ 59,000
|
|
$ 31,000
|
|
|
Accounts Receivable
|
83,000
|
|
71,000
|
|
|
Inventory
|
275,000
|
|
118,000
|
|
|
Land
|
80,000
|
|
30,000
|
|
|
Buildings and Equipment
|
500,000
|
|
150,000
|
|
|
Investment in Saturn Inc.
|
215,000
|
|
|
|
|
Cost of Goods Sold
|
490,000
|
|
310,000
|
|
|
Depreciation Expense
|
25,000
|
|
15,000
|
|
|
Other Expenses
|
62,000
|
|
100,000
|
|
|
Dividends Declared
|
45,000
|
|
25,000
|
|
|
Accumulated Depreciation
|
|
180,000
|
|
90,000
|
|
Accounts Payable
|
|
86,000
|
|
30,000
|
|
Mortgages Payable
|
|
200,000
|
|
70,000
|
|
Common Stock
|
|
300,000
|
|
50,000
|
|
Retained Earnings
|
|
385,000
|
|
140,000
|
|
Sales
|
|
650,000
|
|
470,000
|
|
Income from Subsidiary
|
|
33,000
|
|
|
|
|
|
|
|
|
$1,834,000
|
$ 1,834,000
|
$ 850,000
|
$ 850,000
|
Additional Information
1. On January 1, 2010, Saturn reported net assets with a book value of $150,000 and a fair value of $191,250. The difference between the fair value and book value of Saturn is related entirely to Buildings and Equipment. All of the capital assets in this account have an estimated useful life of 11 years.
2. At December 31, 2011, Potter's management reviewed the amount attributed to goodwill and concluded that goodwill was impaired. The implied fair value of goodwill was $14,000. Goodwill and the impairment was assigned proportionately to the controlling and noncontrolling shareholders.
3. Potter uses the equity method of accounting for its investment in Saturn.
4. As of December 31, 2011, Potter owed Saturn $9,000. This is properly reflected in the year end trial balances.
Required:
A. Give all eliminating/adjusting entries needed to prepare the consolidated Balance Sheet, Statement of Retained Earnings and Income Statement for December 31, 2011.
B. Prepare the consolidating workpaper as of December 31, 2011.
C. Reconcile the following accounts using a T-Account format from Date of Acquisition to the balance as of 12/31/2011, assuming that Saturn did not declare a dividend in 2010.
Attachment:- Assignment File.rar