Question: Complete the worksheet below to consolidate the financial statements of the parent and subsidiary on 12/31/2015. Parkins purchased Sanville on 1/1/2015.
On January 1, 2015, Parkins Co. paid $1,530,000 to purchase 100% of the common stock of Sanville Company.
On the date Parkins acquired Sanville, the book value of Sanville was $1,200,000. Sanville's Common Stock was $800,000, and Retained Earnings was $400,000 on the date of acquisition.
On date of the acquisition Sanville's Land was undervalued $90,000; Buildings (20 year life) were undervalued $160,000; Equipment (5 year life) was overvalued $40,000; and Patents (3 year life) were undervalued $72,000.
| 12/31/2015 Parkins Company |
12/31/2015 Sanville Company |
|
| Income Statement |
|
|
| Revenues |
(1,600,000) |
(900,000) |
| Cost of Goods Sold |
720,000 |
420,000 |
| Depreciation Expense |
200,000 |
80,000 |
| Amortization Expense |
|
|
| Operating Expenses |
120,000 |
100,000 |
| Equity in Net Income of Sanville |
(276,000) |
|
| Net Income |
(836,000) |
(300,000) |
|
|
|
| Statement of Retained Earnings |
|
|
| Retained Earnings 1/1 |
(1,676,000) |
(400,000) |
| Net Income (above) |
(836,000) |
(300,000) |
| Dividends Declared |
240,000 |
160,000 |
| Retained Earnings 12/31 |
(2,272,000) |
(540,000) |
|
|
|
| Balance Sheet |
|
|
| Current Assets |
1,090,000 |
800,000 |
| Investment in Sanville |
1,646,000 |
|
|
|
|
|
|
|
| Patents |
216,000 |
|
| Land |
640,000 |
180,000 |
| Buildings-net |
1,200,000 |
800,000 |
| Equipment-net |
680,000 |
460,000 |
| Goodwill |
|
|
| Total Assets |
5,472,000 |
2,220,000 |
|
|
|
| Current Liabilities |
(400,000) |
(480,000) |
| Long-term Liabilities |
(800,000) |
(400,000) |
| Common Stock |
(2,000,000) |
(800,000) |
| Retained Earnings-above |
(2,272,000) |
(540,000) |
| Total Liabilities & Equities |
(5,472,000) |
(2,220,000) |
Complete the consolidation entries and label S, A, I, D, E where appropriate.