Required:
Prepare an Excel worksheet to consolidate Allegheny Company and its two subsidiaries. (Keep any non-controlling interests in each subsidiary company separate-you may assume the purchase prices of each investment are proportional to the total fair value of each company.) You should include in your worksheet (at minimum):
All necessary workpaper elimination entries for the preparation of consolidated financial statements for the year ended December 31, 2016.
The workpaper for the year ended December 31, 2016. Make sure you key (cross-reference) all of your adjustments to your elimination entries in an acceptable manner (numbers, letters, colors, etc.)!
Background:
Boston Corporation purchases 90% of the outstanding stock of Charleston Company on January 1, 2013 for $603,000 cash. At that time Charleston had the following stockholders' equity balances: common stock, $200,000; additional-paid-in-capital in excess of par, $80,000; and retained earnings, $300,000. All book values approximate fair values except for the plant assets (undervalued by $50,000 and with an estimated remaining life of 10 years). Any remaining excess is goodwill.
On January 1, 2015, Allegheny Company acquires a 60% interest in Boston Corporation for $750,000. At that time Boston had consolidated stockholders' equity of: common stock, $500,000; additional-paid-in-capital in excess of par, $150,000; and controlling retained earnings, $500,000. It was determined at that time that Boston's plant assets are undervalued by $50,000 and have a 10-year remaining life. Any remaining excess is goodwill.
Intercompany merchandise sales from Charleston to Boston for 2016 resulted in: (1) seller's goods in buyer's beginning inventory, $7,500; intercompany sales during 2016, $125,000; seller's goods in buyer's ending inventory, $10,000; and gross profit on intercompany sales of 80% in all years.
On January 1, 2015, Boston sells plant assets with a cost of $80,000 and accumulated depreciation of $45,000 to Allegheny for $50,000. Remaining life of the plant assets at the time of sale is estimated at 5 years.
The trial balances of each company at December 31, 2016 are presented below:
Allegheny Boston Charleston
Sales (900,000) (700,000) (600,000)
Cost of goods sold 570,000 425,000 400,000
Operating expenses 205,000 200,000 150,000
Equity in subsidiary income-Boston (72,000)
Equity in subsidiary income-Charleston 45,000)
Net income (197,000) (120,000) (50,000)
Retained earnings, 1/1/2016 (922,000) (620,000) (500,000)
Net income (197,000) (120,000) (50,000)
Dividends paid 50,000 -0- -0-
Retained earnings, 12/31/2016 (1,069,000) (740,000) (550,000)
Inventories 245,000 60,000 120,000
Other current assets 850,000 102,000 390,000
Investment in Boston Corporation 894,000
Investment in Charleston Company 828,000
Plant assets 1,200,000 800,000 600,000
Accumulated depreciation (450,000) (300,000) (200,000)
Total assets 2,739,000 1,490,000 910,000
Liabilities (170,000) (100,000) (80,000)
Common stock, $10 par value (1,500,000) (500,000) (200,000)
Additional paid-in capital in excess of par value -0- (150,000) (80,000)
Retained earnings, 12/31/2016 (1,069,000) (740,000) (550,000)
Total liabilities & shareholders' equity (2,739,000) (1,490,000) (910,000)