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P6-32

a.

Consolidation Workpaper in Year of Intercompany Transfer


Eliminating entries, December 31, 20X6:
E(1)

E(2)

E(3)

Income from Subsidiary


32,000
Dividends Declared
Investment in Lane Company Stock
Eliminate income from subsidiary.
Income to Noncontrolling Interest
8,000
Dividends Declared
Noncontrolling Interest
Assign income to noncontrolling interest:
$8,000 = $40,000 x .20
Common Stock__Lane Company
Retained Earnings, January 1
Differential
Investment in Lane Company Stock
Noncontrolling Interest
Eliminate beginning investment balance.

E(4)

Goodwill
40,000
Differential
40,000
Assign differential to goodwill.

E(5)

Goodwill Impairment Loss


25,000
Goodwill
25,000
Recognize impairment of goodwill.

E(6)

Retained Earnings, January 1


Noncontrolling Interest
Land
Eliminate unrealized gain on land.

E(7)

4,000
28,000

1,000
7,000

100,000
105,000
40,000
204,000
41,000

8,000
2,000
10,000

Buildings and Equipment


Gain on Sale of Equipment
Depreciation and Amortization Expense
Accumulated Depreciation
Eliminate intercorporate sale
of equipment.

5,000
20,000
2,000
23,000

Depreciation expense adjustment:


Depreciation recorded ($70,000 / 10 years)
Depreciation required ($75,000 / 15 years)
Required decrease

$ 7,000
(5,000)
$ 2,000

Accumulated depreciation adjustment:


Required balance ($5,000 x 6 years)
Balance recorded ($7,000 x 1 year)
Required increase

$30,000
(7,000)
$23,000

E(8)

Accounts Payable
Accounts Receivable
Eliminate intercorporate
receivable/payable.

7,000
7,000

P6-32

(continued)

b.

Prime Company and Lane Company


Consolidation Workpaper
December 31, 20X6
Item

Prime
Company

Lane
Company

Eliminations
Debit
Credit

Sales
240,000 120,000
Gain on Sale of Equip.
20,000
(7) 20,000
Income from Subsidiary
32,000
(1) 32,000
Credits
292,000 120,000
Cost of Goods Sold
140,000
60,000
Deprec. & Amortization
25,000
15,000
(7)
Goodwill Impairment Loss
(5) 25,000
Other Expenses
15,000
5,000
Debits
(180,000) (80,000)

Consolidated
360,000

2,000

360,000
200,000
38,000
25,000
20,000
(283,000)
77,000

Income to Noncontrolling Interest


Net Income,
carry forward

112,000

40,000

85,000

2,000

69,000

Ret. Earnings, Jan. 1

338,000

105,000

Net Income, from above

112,000
40,000
450,000 145,000
(30,000) (5,000)

(3)105,000
(6) 8,000
85,000

2,000

330,000
69,000
399,000

Dividends Declared
Ret. Earnings, Dec. 31,
carry forward
Cash and Receivables
Inventory
Land
Buildings and Equipment
Investment in Lane
Company Stock
Differential
Goodwill
Debits
Accum. Depreciation
Accounts Payable
Bonds Payable
Common Stock
Retained Earnings,
from above
Noncontrolling Interest
Credits
1,311,000
P6-32

(continued)

(2)

420,000

140,000

113,000
260,000
80,000
500,000

35,000
90,000
80,000
150,000

232,000

8,000

(8,000)

(1)
(2)
198,000
(8)

4,000
1,000

(30,000)

7,000

369,000

7,000

141,000
350,000
150,000
655,000

(6) 10,000
(7)

5,000

(1) 28,000
(3)204,000
(3) 40,000 (4) 40,000
(4) 40,000 (5) 25,000

1,185,000

355,000

205,000
60,000
200,000
300,000

45,000
20,000
50,000
100,000

420,000

140,000

1,185,000

(7) 23,000
(8)

7,000

(3)100,000

15,000
1,311,000
273,000
73,000
250,000
300,000

198,000
7,000
369,000
(6) 2,000 (2) 7,000
(3) 41,000
46,000
355,000
392,000
392,000

c.

Prime Company and Subsidiary


Consolidated Balance Sheet
December 31, 20X6

Cash and Receivables


Inventory
Land
Buildings and Equipment
Less: Accumulated Depreciation
Goodwill
Total Assets

$
$655,000
(273,000)

Accounts Payable
Bonds Payable
Noncontrolling Interest
Common Stock
Retained Earnings
Total Liabilities and Stockholders' Equity

141,000
350,000
150,000

382,000
15,000
$1,038,000
$

73,000
250,000
46,000
300,000
369,000
$1,038,000

Prime Company and Subsidiary


Consolidated Income Statement
Year Ended December 31, 20X6
Sales
Cost of Goods Sold
Depreciation and Amortization Expense
Goodwill Impairment Loss
Other Expenses
Total Expenses

360,000

$200,000
38,000
25,000
20,000
$

Income to Noncontrolling Interest


Consolidated Net Income

283,000
77,000
(8,000)
69,000

Prime Company and Subsidiary


Consolidated Retained Earnings Statement
Year Ended December 31, 20X6
Retained Earnings, January 1, 20X6
20X6 Net Income

$
$

Dividends Paid in 20X6


Retained Earnings, December 31, 20X6

330,000
69,000
399,000
(30,000)
369,000